From the Washington Examiner:
Huge hit to home prices in west in 2023, Goldman warns: Phoenix, SF, Seattle
Houses in several overheated cities in the western United States will see massive price declines in 2023, researchers at Goldman Sachs predict.
In a report released this week, the bank’s economists noted a stark regional divide in expectations for home prices, with cities west of the Mississippi facing steep price corrections in the face of elevated mortgage interest rates.
“On one hand, the model suggests that expensive [metropolitan areas] in the Pacific Coast and Southwest regions could see cumulative incremental home price declines of 15-20%, given how dramatically affordability has declined over the past couple of years. On the other hand, the model suggests that the Mid-Atlantic and Midwest regions will likely face limited price declines,” the economists wrote.
…
Meanwhile, Miami and Baltimore are the two urban areas Goldman Sachs identified that are expected to see housing price increases both this year and next. Philadelphia, New York, and St. Louis are forecast to see a slight decline in housing prices this year, but then see prices go back up in 2024.
The researchers said that price trends at the metro level will be dictated by a “tug-of-war between housing demand and supply” over the next two years.
“[Metropolitan statistical areas] with stronger affordability like Chicago and Philadelphia — for which payments on new mortgages only cost roughly a quarter of monthly income — should see smaller home price declines than metros with poor affordability like many cities in the West — some of which are seeing mortgage payments claim three-quarters of monthly income,” the report reads.
first
This reminds me of Grim’s adventure/issues with his Leaf in the cold weather…
https://www.motortrend.com/reviews/road-tripping-in-our-long-term-electric-test-cars/
“Cold-weather range loss has been a real issue for our long-term Rivian R1T, very nearly stranding us on an early spring camping trip in the mountains. With overnight temperatures dropping into the low 30s, the truck was losing more than 30 miles of range per day just sitting there.”
“The Memphis Winterpocalypse cometh: 5 degrees, wind, snow, glare ice, and idiots aplenty in hiked-up 4x4s spinning out. (Lucid Air) Arrived in town with 188 miles of range, made two 22-mile round trips to my parents’ house, range dropped to 39 miles upon arrival the third day (with just 55 miles driven) and I thus entered turtle mode.
Had to drive 9 miles heater off and feet freezing. Hooked up to 350-kW charger, nobody else around, and the station recognizes the car instantly and starts charging. At 7 kW. One hour and 45 minutes to full charge was the estimate while a “Charging limited by cold battery” message appeared. Apparently the Air’s battery was not warmed by an hour of driving, during 40 minutes of which I had the cabin heat on at 65 degrees. Charge rate eventually maxed at 100 kW.”
Philadelphia, New York, and St. Louis are forecast to see a slight decline in housing prices this year, but then see prices go back up in 2024.
Ahahaha! I don’t know the reasoning behind the St. Louis area but as I’ve said before, the NY/NJ area’s insane prices will outlast a nuclear blast along with cockroaches and a forever line of house tour guides smothered in the aroma of cigarettes and Chanel Eau Vive. If these tour guides learned anything, it’s that cigs and perfume will compete with dog smell and body odor as they show a house.
Electric cars sound like so much fun.
I hope GS is correct. Would be great if my GR home maintained it’s value and Vegas homes dropped by 20%.
https://twitter.com/elerianm/status/1619639708383936512
Nice chart of frequent topic re-tweeted by someone worth following…
“So the attitudes, preferences, and behaviors of the rich have outsize effects not only in terms of their direct dispensation of resources, which is enormous in itself, but even more in terms of their disproportionate influence over public policy, which affects millions.”
Does the author mean ‘disposition’ rather than ‘dispensation’? Or explain how dispensation makes any sense here….
I would have expected at least grammatically correct drivel from an English Literature major, although that was a long time ago and he seems to have been living in mom’s basement since then…
I hope at the very least you have a free subscription and don’t pay for this garbage….
https://www.linkedin.com/in/david-roberts-vox/
Inquiring minds want to know!
Vox can be pretty selective with data points at times. But their theme is often correct, if not as exaggerated as they try to make it to prove a point. Unfortunately, that’s the sh1t that sells.
It’s garbage…the guy is at best a journalistic (gr)drifter, and that’s being generous. First thing that popped when I clicked the link in the post was VOX soliciting me with “Pay $120 annually for a subscription”. For THAT guy’s thoughts?
I’m not arguing whether his data points were selective or analysis skewed…I’m suggesting the guy is not even qualified to make the assessments necessary to do that…
His article was comparable to the shit Pumps posts from his Twitter feed as ‘financial analysis’.
He is the equivalent of the “Financial Samurai”….maybe they could team up, pool their funds, and split the rent on a 1BR.
“Philadelphia, New York, and St. Louis are forecast to see a slight decline in housing prices this year, but then see prices go back up in 2024.”
Ed,
Sent my contact details to grim. I guess look out for it.
Wow, what a crystal ball these people have. Suddenly they can see the clear future of a soft landing. Seems like entire Fed tightening was about shedding wage leverage for workers and nothing else. Of course, without that how does paying 50%-100% higher for a home than 2 years ago remain upwardly sustainable into future. Guess I am dumb one.
“There will be a minor recession at end of 2023 but employment will recover quickly”
“Prices will fall in 2023 but go right back up in 2024”
M’Lord the Vox populi have spoken
Bystander,
Thx, will look out for Grim’s message.
“Prices will fall in 2023 but go right back up in 2024”
Don’t forget the $1,000 per month car payments with the food bill, gas bill, electric bill, everything else bill and the boiler that just sprung a leak. And I will admit, I never saw as many co-pays ON TOP of co-pays for standard medical procedures but will say the thought of universal health care makes me queasy beyond belief. If you hate standing in line for hours at the DMV, imagine waiting for simple health care issues, let alone major issues. Universal HC will be a boondoggle. That’s a topic for another day.
Here is a question for the board. Gary’s Fox News humble brag prompted me to think about what people are watching in prime time and whether or not the viewers are intelligent and/or watching intelligent television programs. Admittedly, it’s mostly anecdotal, but I just want to sense check the main posters here.
When I was growing up, my families television habits were pretty much like this. After dinner, We watched the end of the news from about 6:15pm to 7pm. Jeopardy. Usually another terrible game show besides Wheel of Fortune which we found too dumb (password, jokers wild, bowling for dollars, etc.) and then MASH, All in the Family, and then later in the 70s, Welcome back Cotter or even the White Shadow. Oh yeah, there was the bad Love Boat/Fantasy Island exacta too, which I watched with my sibs, but my parents hated. We never got into the variety shows like Carol Burnett Show or Donny & Marie. We always found them pretty dumb too. I loved the Dukes of Hazard (I think I was maybe 10 at it’s peak), but deep inside, knew it was horrible. Finally, as the sibs got older, I was left alone to watch all of those abhorrent 80s shows (Different Strokes/Family Ties/Cosby Show/Fresh Prince, etc.) which were pretty much all the same show. Cheers was probably the only decently written show. And it seemed over time, the dialogue in most sitcoms just got lamer and lamer with the themes of the shows becoming more predictable than ever.
I didn’t watch much TV in college besides the late night talk shows and mainly it was Letterman and Conan. Then just pretty much sports as the sitcoms, from Friends, Scrubs, Modern Family, The Office, Parks and Rec (which was basically the Office outside), Big Bang, etc. all blew chunks IMO. I watched most of the Seinfelds and than god for the Sopranos. And I also watched an occasional ShowTime or two series as I found most of the stuff HBO was putting out catered too much to the Friends audience (think Entourage). I did watch the occasional British series as I found their dialogue much more stimulating (such as Coupling and the old BlackAdders which reminded me a lot of the writing in MASH).
So you look at PrimeTime today and it’s completely unwatchable to me. Dancing competitions, mascots singing, talent shows where there is almost no talent so the woke audiences always pick the artist with the missing leg, or cancer or even mental illness. Everything on the Food Channel is the same cooking contest. Even the real estate shows are all pretty much the same. Every sitcom is either a remake of the Wonder Years or has a cast with super powers like Ghost for example. The writing is obvious and the dialogue infantile.
So a quick glance comparing AGT with Friends shows that the Friends viewership doubled AGT. MASH had even higher ratings than Friends with a lot less TVs around, but then again, there were a lot less alternative channels.
I’m guessing today, most people are just streaming whatever they want to watch during primetime. When a show actually airs doesn’t matter much any more.
So looking at the FOX News numbers. They get about 1.6 million viewers. AGT gets about 7 times that and Friends would have gotten about 12 times that. Mash, would have been closer to 15 times the FoxNews viewership. So the number of people who watch a news channel during prime time are a pretty small segment of the population (thankfully).
So here’s my loaded question for you guys? Do you watch anything that is live released in primetime? Do you agree with me that sitcoms have become completely unwatchable as time progressives? What is with AGT? American Idol? The Voice? The Masked Singer? These shows are unwatchable to me. They are little more than Karaoke for the masses. And the judges are borderline brain damaged who have to sit there and make believe these performers have talent.
Am I crazy or have the major networks turn to complete shite. All I can watch these days is an occasional NetFlix/Apple+/StarWars show and besides sports, that’s about it.
And what I find fascinating is that Hollywood is absolutely brilliant when it comes to producing movies. Their skills just get better and better and better.
And that’s a quick peak inside my head. I hope you find it as entertaining to read as I found it to type.
Bystander: This past year was just a little hiccup, Inflation is over , and we are going to have a soft landing. There will be like a little recession, but not noticeable. Rates will go back to 3 percent for 30 year mortgages, and 20 percent a year price increases a year will resume. Massive debt/ spending, geo political events, none of that matters. Ok so some pain in the west real estate wise, but that will resolve too. So get out there and snap up every available house you can. Don’t be late!
Looks like I picked the perfect day to enter the market. :P
“…entire Fed tightening was about shedding wage leverage for workers…how does paying 50%-100% higher for a home than 2 years ago remain upwardly sustainable into future. Guess I am dumb one.”
You and I have never been more aligned in our thoughts…hearing Fed speakers, market commentators, economists, etc. all uniformly speak about the danger of a wage inflation spiral after literally every good from from staples, to discretionary, to shelter has gone through the roof is just fingernails on the chalkboard for me….
Fed and Feds to anyone other than the top quintile: “So we distorted monetary policy for so long and from a fiscal and a policy perspective so mismanaged the last three years that any item you could previously afford on your compensation is now nearly a luxury but, just as your wages have the opportunity to at least recapture some of the lost ground, it is absolutely imperative for us to squelch any wage gains for you even if it means – and likely with the intention – of having many of you of tossed out of work. Thank you for your participation and understanding.”
What the serious fuck?
Feds are lucky most of those four deciles are not knowledgeable enough on these topics to connect dots otherwise you’d border on serious civil unrest.
What they are attempting to do is criminal. Worse.
So…that was my populist post for the day. Back to the market coal mines. Lib, longs?
Leftwing,
Vox is written by a bunch of socialist brats who think they are using their liberal arts degree to change the world to think like them. They might as well change their name to Woke Media. Vox took over an Atlanta Braves fan website and eventually changed the name to erase any mention of American indian symbols, while hosting writers who inject anti-business assumptions into their essays. They’ve turned the video game website Polygon into a woke video game editorializing website that is mostly interested in grading the DEI of games, rather than the fun of playing them. Any RPG that doesn’t offer a female character with a gay romance option gets a complaint.
On the other hand, gradually all media is becoming like Vox.
Left,
Really haven’t done a lot searching lately on longs. Have two investment club meetings coming up next week, so maybe then.
“On the other hand, gradually all media is becoming like Vox.”
I am looking forward to the release of the mini-series History of the World Part II in March on Hulu.
Am I crazy or have the major networks turn to complete shite
You are sane.
I would think a reality show is way less to produce than something like Friends or Cheers as you don’t have 5 or 6 mega-stars to pay. Just a million dollar payout to a winner or something like that, it seems much cheaper to produce.
With virtual lifelike looking humans coming on line shortly, even stars may be eliminated by computer generated humans. Some of those photos of non people are attractive non people. In ten years the overpaid actor might go the way of the dinosaur as well. Let the Chat bot write the script, and charge the same for the product.
Capitalism win.
10:45 hOw cOuLD aNyOne bE aNtI-bUsInESS ??!!??
Why that’s just unAmerican /s
LW,
You didn’t like the picture I posted a week ago, I’d suggest you don’t click this link, it is just a you tube video. It does show the end of times, however.
https://youtu.be/hYjHhqLSiN4?t=121
10:33 I’m a fan of watching movies or series on TV.
Cut the cord last year, so saving a lot by not getting the usual stuff packaged.
The raw cable feeds are “meh” usually. Though you can find some gems. Architectural Digest has a channel for example. Movie craft isn’t dead it’s just overshadowed by mindless superhero films and sequels. Good indie films/series are my jam. I love AXIS TV as they are doing everything they can to save Rock & Roll. Throughout my life I’ve always gravitated toward radio.
Libturd,
I watched much the same as you.
Star Trek and Gilligan’s Island reruns in the afternoon after school.
Mostly shows my family liked at night.
My Grandfather watched Hee Haw every Sunday at 7, so never saw 60 Minutes while he was alive. Early 80s ATeam, Dukes of Hazzard, Miami Vice, different strokes. In the early 80s I’d stay up super late Saturday night watching SNL, SCTV then the top music videos.
In the 90s as an adult I used to watch Seinfeld, Friends, Frasier, and a lot of peers did too.
Over the last 10 years the only show that most people seemed to watch was Game of Thrones.
As far as I can tell, sitcoms are now total garbage. I missed Arrested Development and Curb Your Enthusiasm when they came out, but recently caught up with them thanks to streaming.
3b,
Until this 35 year old, who paid 700K (40% over 2018), for his dump up the street, gets his a$$ thrown out on street then we are living in pure fantasy land. His job is in a bubble and his price is in a bubble. Here is his career summary, no lie.
IT recruiter
Vice President
Jan 2019 – Present
Clubhouse Food/Beverage Manager
XXX Country Club
Mar 2014 – Jan 2019
Phoenix,
Maybe that will get ChiFi past his Depeche Mode fetish?
Ex,
I listen to a lot of music too. Nearly all genres. Even country and classical. Did my Peloton ride this morning to Gospel. Nearly killed me. Remind me to stay away from black instructors. Jimmy the Greek was not incorrect. Hey, was he the original antiwoke?
Do you agree with me that sitcoms have become completely unwatchable as time progressives? What is with AGT? American Idol? The Voice? The Masked Singer? These shows are unwatchable to me.
Agree. They’re painful. If I’m watching TV, it’s some news, some old movie, some sporting thing, a documentary, arts, science, nature, that type of thing. If it’s sitcom or drama I grew up with, perhaps I’ll watch to reminisce. I think most everyone on this blog would tune into things that highlight ideas and events. The shows you mentioned above are puppets for muppets who clap like seals.
Anyone thinking of using State Farm? Think twice after watching this:
https://youtu.be/bTNiweGySc4
I’m here to help.
Phoenix,
Maybe that will get ChiFi past his Depeche Mode fetish?
Bystander: That is insane, but that’s what it is a fantasy land, completely irrational in my mind. But, we are told it’s all going to be fine. Supposedly Powell is supposed to talk tough on Wednesday, after he does his 25, ( of course if he wanted to make a point he would do 50), but the market will just dismiss him. 25 on Wednesday, 25 in March, and then a pause for a few months and then back to cutting rates. That’s the story the market is telling itself.
Phoenix,
That skit was funny! Very good!
Phoenix,
Missed a part
https://imgur.com/MWYpD
re: ” major networks turn to complete shite”
Do you still listen to terrestrial radio? Part of the plan since the advent of Youtube is to switch to subscription services. All better entertainment is now behind a paywall.. As of last summer streaming services captured more viewers than cable or broadcast TV.
From Nielsen – “In the U.S., streaming captured 34.8% of viewership in July 2022, while cable accounted for 34.4% and broadcast came in third at 21.6%.”
Best part of it is everyone is captured now so they are now stuffing back in the traditional pause the program for advertisements too.
Boy do I miss Tivo days and not having to lift a finger using Skipmode to bypass the commercials. Impossible to do today with the current apps, you have to pay extra for premium plan no commercials and that will probably go away too.
Fast: All that reality show/ singing dancing crap migrated over here from the Brits. Of course, we took it to a whole other level!! I catch the local news at night, then some BBC world news. There are some good European movies on Netflix, police/ mysteries. The actors/actresses all look like everyday people, not the Hollywood types like here. I also do a lot of reading, gym, listen to music. Get together with some of my childhood friends, usually once a week or so. I don’t know how network TV/ basic cable survives these days. All crap.
“Until this 35 year old, who paid 700K (40% over 2018), for his dump up the street, gets his a$$ thrown out on street then we are living in pure fantasy land. His job is in a bubble and his price is in a bubble…IT recruiter Vice President…”
This may hurt but….recruiters are basically brokers, ie. they make money on turnover, not direction.
All the recent firings and associated re-hirings may have the guy moving closer to Greenwich shortly…
Mortgage guy up the street from me was kinda nervous at our neighborhood holiday party two weeks ago. He said volume has cratered, he spent something like 300k on his remodel too, you can bet he is in for 700k from the first and second loans. His dad was the GC too, they did that all white farmhouse look, it’s is a monstrosity. I won’t post pics because I like the guy, but he needs to do about 50K worth of landscaping now, as it is all a mess after a two year renovation.
The good times always last forever….!!!
No One,
LOL!! Omg.
Juice. A few of those white farm house ones by me too. I think they are blinding, and remind of the old resorts up in the Catskills when I was a kid.
Until this 35 year old, who paid 700K (40% over 2018), for his dump up the street, gets his a$$ thrown out on street then we are living in pure fantasy land. His job is in a bubble and his price is in a bubble. Here is his career summary, no lie.
In my neighborhood, it’s a 29 year old. 700k for the house behind me, bidding war. He drives a Tesla. House was 450 to 500k at best pre covid. It’s in the worst condition as well. He hasn’t even moved in yet. He’s always at his girlfriends home. He’s basically paying that mortage/taxes for a house that’s collecting dust and decaying.
3b,
Based on today’s market action and sentiment. If Powell only raises a 1/4, I think it signals an all clear to market psychology in the short-run. I am still not sold on the long run, and the financial press this morning certainly isn’t either.
My linkedin is all recruiters #opentowork…
Was just looking at some of my 2022 spending… under $2250 for gas + service last year for 3 vehicles… cannot complain… and none of those vehicles get over 23 MPG
My linkedin says I’m a janitor. Really.
I get lots of offers too.
Makes me long for the innocent days of Frankie Goes to Hollywood
Libturd says:
January 30, 2023 at 11:00 am
Phoenix,
Maybe that will get ChiFi past his Depeche Mode fetish?
Lib: I agree, that’s why I think he should go the 50 on Wednesday, if nothing else it would show he is serious, but even then the market will after an initial sell off, will discount it, and go back to the almost done raising, then pause, then decline.
Libturd Say Relax
Was that scene part of a real episode?
No One says:
January 30, 2023 at 11:25 am
Phoenix,
Missed a part
https://imgur.com/MWYpD
3b,
Quite frankly, I’m astounded we are even where we are now. Looking at the recent data, a 4% increase lowered inflation by what, 3%? I think it’ll be right back before we know it. And I think the supply line issue is bullsh1t. This was purely from the great government giveaway.
You down with PPP? Yeah, you know me.
Can someone explain this to me?
https://www.wholefoodsmarket.com/product/365-by-whole-foods-market-tobacco-vanilla-bean-scented-candle-1-each-98fchei
If you review the indicators, we will have $5+ gas again by Memorial Day.
I bet Gary buys it. Do they have a Beer and Cat Piss variety too?
You see Chevron profits and share buy back? What’s going to stop other industries from pushing further price increases in the name of obsessive profits.
Gas is really a great product to sell. The price goes up for holidays. For wars. For anticipated demand increases. For shortages. For fake output limits by OPEC. When a refinery closes. When electric cars are projected to take over. When a Muslim farts. When the weather is nice. It pretty much only moves in one direction.
12:24 I’ll just leave this here:
https://goop.com/heretic-this-smells-like-my-orgasm-candle/p/
left,
That is his income model, yes but I am not buying this layoff/rehire strategy of 2023. That is majorly expensive for a company to lose knowledge only to rehire it a few months later. No company would do that. There are thousands of fly by night recruiting firms and his business is not unlike when everyone became a realtor in 2004. There will be a flushing of recruiting agency staff. It is already happening. Lots of layoffs are within HR/hiring. It will come.
Ex: I just don’t know what to say after that.
This is my favorite candle scent.
https://tinyurl.com/eau-de-libturd
Funny Lib. I list myself as a technology product manager and get emails from Serv-pro on a new career.
1:12 these are complicated times.
They are Ex. Which is why you need https://tinyurl.com/eau-de-libturd
I cannot.
WASHINGTON, D.C. — More Americans name the government as the nation’s top problem in Gallup’s latest poll, which encompassed the rocky start of the 118th Congress’ term. With high prices persisting, inflation remains the second most-cited problem (15%), and amid elevated tensions about the southern U.S. border, illegal immigration edged up three percentage points to 11%. Mentions of the economy in general fell six points, to 10%, the lowest reading in a year.
Ex: I think we all can agree on that, at least to some degree.
“Looks like I picked the perfect day to enter the market. :P”
Meh, one day….
Although you did hop in long with VIX in the 18s (13 month low), ahead of the major earnings week of the year including megacaps, ahead of the Fed and ECB meetings, and with most technical indicators flashing overbought…
You skydive?
Hopefully this/next week goes your way and not against you.
Also, as always I’m confused about all this Fed handwringing…they have told you they are doing 25 this go-around, what’s the debate? What they should do? Save that for an Econ 304 class, all that matters is what they will do. 25 and a lecture.
“That is his income model, yes but I am not buying this layoff/rehire strategy of 2023. That is majorly expensive for a company to lose knowledge only to rehire it a few months later. No company would do that.”
Obviously was not implying that…any tech (as opposed to HR, Admin) worker being cut is getting rehired right now very quickly. By someone else. Biggest issue, my understanding, is the demand is there for them but many of them want to take their severance time off.
Recruiters are brokers, they work on commission and are concerned about volume, not direction.
In the infamous works of Randolph and Mortimer Duke….”tell him the good part….we make money whether or not our clients do…”
Churn = $
left: the mole at the Fed leaks to this guy, not to tip their hand, but to throw out trial balloons….
ECONOMY
Fed’s Interest-Rate Strategy in 2023 Hinges on How Quickly Rate Increases Slow Economy
Moderating the pace of rate rises would give the Fed more time to study the effects of its moves
The Federal Reserve will need to gauge how effective rate increases have been in cooling economic growth.
By Nick TimiraosFollow
Updated Jan. 30, 2023
Federal Reserve officials’ deliberations this week over how much more to raise interest rates will hinge on how much they expect the economy to slow this year.
Key to those discussions at their two-day policy meeting will be estimating how much their previous rate increases will cool growth and inflation over time, or what Nobel Laureate Milton Friedman called the “long and variable” lags of monetary policy.
“There will be a lot of thinking about ‘Are the effects we’re getting about on the track that we expected? Are they coming sooner, or are they coming bigger?’” said William English, a former senior Fed economist who is a professor at the Yale School of Management.
Fed officials are lifting rates to lower inflation by restraining growth. They are likely to raise their benchmark federal-funds rate on Wednesday by a quarter percentage point to a range between 4.5% and 4.75%, extending the most rapid adjustment in interest rates since the early 1980s.
If the lags are long, last year’s rate increases are just beginning to work their way through the economy and will strongly curb economic activity in the year ahead. That implies the Fed doesn’t have to raise rates much more or keep them high for very long.
But if the lags are shorter, the previous hikes have largely taken effect already and the central bank could decide it has to raise rates higher or hold them high for longer to achieve the desired effect.
Moderating the pace of rate rises would give the Fed more time to study the effects of its moves. A quarter-point increase this week would slow them for a second consecutive meeting after officials raised rates by a half point last month and by 0.75 point at four consecutive previous meetings.
Economists at Goldman Sachs see shorter lags. They say markets’ pessimism is overdone, and they are among those who think the economy will prove more resilient than anticipated, which could call for a longer period of higher rates.
“While the consensus worries that the lagged effect of rate hikes will cause a recession this year, our model says the opposite—the drag on [gross domestic product] growth from monetary policy tightening will diminish substantially in 2023,” said David Mericle, chief U.S. economist at Goldman Sachs. They expect to see a similar effect this year from reduced federal government spending last year.
Some Fed officials say interest-rate moves influence the economy faster because they communicate their policy intentions far more explicitly than in the past. Thirty years ago, for example, the Fed didn’t tell the public whether it had made any rate changes at its meetings.
“The market had to go figure out that the Fed was in there doing something. In that world, policy takes a while” to influence the economy, Fed governor Christopher Waller said earlier this month. By contrast, today’s Fed provides guidance about its coming moves, shortening the lags. “I think we’re seeing a lot of the impact for monetary policy coming through in the next quarter,” Mr. Waller said.
Others say this overlooks important changes that have extended the lags. Even if Fed officials have shortened the time it takes between changing its benchmark rate and influencing financial conditions, they haven’t shortened the time it takes financial markets to influence economic activity. Those secondary effects may be taking longer now than in the past because of pandemic-fueled distortions, said Aneta Markowska, chief economist at Jefferies LLC.
In 2020-2021, the government’s response to the pandemic—showering cash on households with stimulus spending and reducing borrowing costs for consumers and businesses—prevented the usual crisis pattern of rising joblessness that amplifies declines in income and spending, triggering a recession. That left private-sector balance sheets in a historically sturdy position.
“We’re in a different world from the last several business cycles,” said Donald Kohn, a former Fed vice chairman. “The last several cycles haven’t had pandemics and land wars in Europe in them.”
Rate increases can slow the economy more immediately when economic growth is being fueled by credit growth as opposed to income growth and government stimulus, which were the big drivers in the postpandemic recovery. The upshot is that this time, it could take longer for the Fed’s moves to be felt through the economy, said Ms. Markowska.
Consumer spending and income growth slowed at the end of last year along with a slowdown in inflation. The Commerce Department reported last week that one gauge of underlying demand, final sales to domestic purchasers, which exclude inventories and trade, rose at a meager 0.8% seasonally adjusted annualized rate in the fourth quarter.
“If you look under the hood of the economy, it is clear things are slowing. Things are grinding down,” said Ray Farris, chief economist at Credit Suisse.
The Fed’s rate moves didn’t slow the economy as much last year as might have been anticipated because the economy was still buoyed by fiscal and monetary stimulus that was supporting activity, Fed Vice Chair Lael Brainard said in a speech this month.
“It is likely that the full effect on demand, employment, and inflation of the cumulative tightening that is in the pipeline still lies ahead,” she said.
The construction sector offers a clear example. Strong demand for housing during the pandemic, together with ultralow borrowing costs, ignited a building boom. The Fed’s rate increases crimped demand, but supply-chain bottlenecks and a burst of apartment-home construction, which is at a 50-year high and takes longer to complete than single-family housing, means the construction industry hasn’t had to lay off workers.
“We haven’t lost a single job in construction. We have these enormous backlogs that are being worked through,” said Ms. Markowska. “Around the middle of the year is when we’re going to feel peak pain.”
Large companies have been resilient to the Fed’s rate hike campaign so far because before it began, they were able to lock in low borrowing costs for several years in corporate bond markets. Small businesses, by contrast, could face more pressure this year from higher rates because they rely on bank loans or shorter-term loans that will face higher borrowing costs sooner.
Consumer spending will be one key to how much the economy slows this year. Households so far haven’t pulled back much in response to higher inflation and rising rates partly because many accumulated large savings early in the pandemic.
Ms. Markowska says low-income consumers have likely exhausted those buffers because credit-card borrowing is rising. She expects many more households to have depleted any savings by November, curbing their spending.
Mr. Mericle of Goldman Sachs sees less reason for consumers to retrench because inflation-adjusted incomes are set to rise if overall inflation continues slowing. With price increases taking less of a bite out of household paychecks, “It’s just not realistic to be drawing down excess savings to the same degree in 2023 as in 2022,” he said.
Write to Nick Timiraos at Nick.Timiraos@wsj.com
Corrections & Amplifications
Ray Farris is chief economist at Credit Suisse. An earlier version of this article incorrectly spelled his name Ray Ferris. (Corrected on Jan. 30)
Timiraos is certainly their guy, wonder what that cost him lol. Above my pay grade whether he is tippee or used to float balloons…you tell me with certainty the latter I’m appreciative as that is new knowledge for me…
A good part of this recent runup is technical (market oversold) and seasonal (tax loss selling rebound for high betas)…but I would not under-estimate the effect of the slowdown in the PCE and firming of the view of the Fed slowing to 25bps…
I’m certainly not of the Fed futures school that a cut is coming in 2023 (although history would say so). I am, however, equally certain that the market has baked in over the last weeks 25bps and if the Fed were to venture to 50bps we’re off 5% easily….unless that 50bps comes with a “and we’re done for now” which obviously wouldn’t happen…
Candidly, I think the 25 is so baked in what we are seeing today is a ‘sell the news’ ahead of the meeting and, like most biotechs, people bought the dream of 25 over the last two weeks and will continue selling the news.
Left: I think the Fed would be better served to go 50 tomorrow to try and yet again to let the market know they are serious. And I would for low it up with a statement saying we are done when we are done. They won’t do that of course.
Don’t disagree 3b and I’ve mostly agreed with you on what the Fed should do…unfortunately not only does that not make me money it loses money so I need to focus on what they will do…at least until someone here gets a Fed Governor seat :)
Interestingly, the FFR curve was always perplexing me with the loosening by year end which I don’t see especially if they do just 25 now…seems historically the largest (median?) time gap between the last raise and first cut is five months…that flashed across my screen earlier today, need to research more, but if accurate would go a long way explaining for me why cuts are priced in then…
They should do 50, but won’t. The problem is that a better part of retail has been conditioned to buy every dip, and the rest are boomers talking their own book.
Crazy. F U money…that’s all it is.
“Talked to someone with a home in one of the LA hills, and their insurance premiums have gone from $7k to $24k to $96k in the last three years.”
Leftwing,
The FED announcement was my major impetus (along with the halfway decent reduced earnings I’ve witnessed so far) for driving me back in in the short-term. It’s gonna be 25%. This is going to cause a mini rally on its own. The rest is the way I’m seeing the greater macro picture. A lot of headwinds will dissipate between February and May. After that, we’ll evaluate again. Don’t fight the FED.
LOL brother, don’t fight the Fed says ‘sell’.
7:25 sounds bizarre.
Also doubt they’re happy about it. They’re either in a burn zone, flood zone, or at risk to topple off the cliff during an Earthquake. Or possibly all three.
Either way it sounds like hassle. The Hills are huge issue on an Emergency. The roads aren’t equipped to handle a major evacuation. Those folks there would burn in their cars. So, there’s that. Tell them to get a Goop candle and relax.
Don’t fight the FED.
I say, “Beat the bastards!”
https://www.youtube.com/watch?v=1JRJ5vz7paE
Left: Keep looking at Treasury inventory on the boards to build my own monthly curve across 2023-2025. The front months approach annualized 5%. I look at the term structure with all the forward implied yields. It just doesn’t make any fucking sense to me. I feel like I am the man who knew too much.
I know….
Season 9 episode 6
https://southpark.cc.com/video-clips/7jz5j0/south-park-a-new-toilet
Hey Ed,
Wolf Bros. are Don Was and Jay Lane. If you look at their photos, it makes sense. They have 4 shows at the Cap in Feb, one day broken up by LI medium Theresa Caputo? WTF?