0:00

I’m Matt Bellamy founding partner of Puck news and I’m covering the inside conversation about money and power in Hollywood, with my new show, the town I’m going to take you inside Hollywood with exclusive inside on what people in Show, Business are actually talking about multiple times a week.

0:16

I’ll talk to some of the smartest people I know journalists insiders, all of whom can break down the hottest topics and entertainment.

Tell you what’s really going on.

Listen now, Today we check in with the US economy which continues to baffle and dismay anybody with the Hotspur to predict what’s going to happen next.

0:40

So to understand why the official story of the American economy doesn’t really make any sense right now just look at GDP versus unemployment official GDP.

Estimates say the US economy has been shrinking for at least, six months official jobs data says the US economy is Basically booming adding an average of about 400,000 jobs per month this year.

1:07

So I’m not trying to sound conspiratorial but someone is wrong here either we are counting jobs catastrophically wrong or much more likely, the initial GDP estimates that we’ve received and that we’ve built.

All of these narratives around, they’re going to be revised very soon.

1:26

And they’re going to show that this big fat economic story that the US has been Shrinking for two consecutive quarters that we are mired in a recession.

That it was just a mirage.

Adding to the dismay and the confusion this week, we got the latest inflation report.

1:42

Many people many, many, many people were expecting a second consecutive reading of zero month-to-month headline inflation but we didn’t get that.

Yes, the government told us Energy prices are down.

You already knew that.

If you’re a driver gas, prices have been falling for something like two months, but core inflation, which is the price of everything, but food, and energy is running hot.

2:06

Actually because of shelter including rents and what is happening, the shelter in America.

While the broader economy is almost certainly not in a recession, the US housing market is as the Federal Reserve raises interest rates to help cool off inflation.

2:23

The most rate sensitive sector of the economy which is housing is taking it right on the chin.

Home sales are down.

Mortgage applications are off 40% from their 2021 Peak for months housing prices.

Isis have held up a little bit because the US has such low inventory.

2:40

We didn’t build enough houses in the 2010s but now National housing prices.

Really do seem to be turning over.

They are falling sharply in some of the hottest markets of the pandemic places, like Boise, Austin Denver.

Now, if you’re feeling a little bit lost by my ramshackle summary of what’s going on in the economy right now, I think that’s appropriate.

3:01

I am confused.

The economy is sort of a ramshackle mess GDP is flashing recession.

The labor market is saying, no way in hell gas prices are down, but inflation is up and rent.

Inflation is up, but housing, prices are down.

3:17

Like what the hell is going on.

So today to help me untangle, this knot, we have Mark zandi Mark is the chief Economist of Moody’s Analytics.

He is one of my number one go-to s on all things macroeconomic.

And today, we talked mostly about the state of the US housing market.

3:36

And the prospect of a correction what falling Nationwide.

Housing prices will mean for the broader economy, the global synchronized decline in housing, the state of China and to get us started.

I hope I’m not too nerdy.

Explanation of a very important economic mystery.

3:54

If the housing and Rental markets, really are turning over and housing and Rental.

Inflation is coming down, according to all the websites apartment list Zillow.

Why does the government say inflation is surging?

4:10

Mostly because of the rising cost of shelter.

I’m Derek Thompson.

This is plain English.

4:39

Mark, zandi welcome to the podcast.

Derek good to be with you, thanks for the opportunity.

Suppose we should start with the inflation report this week and I will begin here with the confession.

I got this totally dead wrong.

I was looking at gas prices and assumed that we would get the second consecutive month of headline.

4:57

Inflation is essentially being zero or just under zero.

We did not get that instead we got core inflation heating up.

What was the most concerning thing that you saw in this inflation report?

What surprised you well headline?

Inflation was fine.

5:13

I mean it was uh, And that’s Victory if that’s where we’re at.

That goes to the lower oil Gas Energy prices so all good there no problem.

The real problem is core inflation, X energy and food and that economies tend to look at that, because that’s a very good forecasts of future inflation because energy, you know, and food prices.

5:34

As we’ve seen go up, they go down, they go around but core inflation.

Gives you a better sense of where we’re headed and now was high uncomfortably High, you know, point.

Six.

We were expecting my guys who do this for a living.

5:49

We’re expecting .3, doesn’t sound like a whole lot but that’s a big difference that’s you know analyzed that’s the difference between seven percent inflation and 4% inflation.

So that’s a big deal and certainly moving in the wrong direction and means that the federal reserve’s got a lot of work to do and raising interest rates.

6:06

So, obviously, markets didn’t like it.

Nobody should like it.

It’s pretty disconcerting.

I just be clear because this got a couple people in trouble.

Last month, we’re reporting here, both month to month numbers and annualized numbers.

So there was this whole rigmarole a month ago, where Joe Biden said, inflation is 0%.

6:27

And some people said, no, that’s the month-to-month number.

You need to report.

Inflation is an annualized number.

So .3 is what you were expecting or what your guys at Moody’s.

We’re expecting for the month to month inflation number and it came in at Double that from month to month.

Yeah.

You guys.

6:42

Exactly right point three.

And then Daniel, As you know, Poor Man’s way of doing that is x 12, 12 months and you can kind of get a sense of what inflation would be for the entire year, if it continued to increase it that month-to-month rate, which it was .3, it’s 4%, ish, kinda sorta of its .6.

7:01

That’s seven percentage so that gives you a sense of the difference between between them.

This shelter index is a key part of why core inflation continues to rise, faster than people like you.

And I were Affecting it increase 0.7 percent in August compared to 0.5 percent in July, the rent index.

7:21

Also Rose 0.7% in August, something a little bit confusing that maybe you can help me clear up, if you ask Zillow, if you say, hey, what’s happening with rent inflation on Zillow?

They’ll say we saw a national rent prices Peak around February March, but you call around to a bunch of other sites, a bunch of other sites.

7:41

They’re listing, sort of, you know, new rents of apartments that are A to, for people to move into.

And they’ll say, yeah, we saw a rat inflation Peak around this spring, but now you ask the government and the government is telling you that rent CPI is still accelerating.

Why are we seeing this discrepancy?

7:57

It’s just way to be allies, does this it surveys renters in groups of of 16, so 1/6 of renter’s one month and then subsequently four, six, six months after that or five months after that.

And so when you get a rent increase, he’s in the marketplace.

8:16

Say back in the month of February, it takes about six months for that to translate through into what it means for rent inflation as measured by the Bureau of Labor Statistics.

So it’s just the methodologically, you know, how to be honest is doing it.

8:31

And in the case of measuring the cost of housing, you know, there’s a lot of non-intuitive things here that you know that go into this one really.

One point, interesting point is for most homeowners, you know, their cost of housing is increased according to the BLS Bureau of Labor Statistics because of this increase in rent.

8:55

But that doesn’t mean the cash.

They’re shelling out to increasing, right?

Because they’ve got a 30-year fixed-rate mortgage 15-year.

Fixed-rate mortgage nothing’s changing for them, but the bailout says, oh your inflation jr8, just Rose.

So from a, you know, cash perspective, and income perspective, it’s not as bad as it sounds.

9:14

It’s Bad.

I’m not saying that it’s just doesn’t mean quite the same thing as if food prices, rise eight-tenths of person because you’re actually shelling out more cash to buy those groceries.

It just seems to me that shelter inflation, like experientially.

It’s just very different than energy inflation.

9:30

When gas prices, change every 12 Weeks Later sees a higher price at the pump.

And when they have to refill their cars have to pay more money for that same amount of gas.

But with rent inflation, a lot of People, most people who are renting our in contracts that are already locked in.

9:49

If they are homeowners, they are paying mortgages that are probably locked in and so it’s a little bit funky.

How Rising shelter.

Inflation should make us think, about the fact that everyone’s paying higher prices, because most people who are paying for shelter are not paying higher and higher and higher prices every single month, that’s a very strange situation.

10:10

Well, that goes back to your Zillow point in mozilo that increase in rent, is for people who are moving into new apartments or someone whose rent the year came up there least came up and now they’re renewing their rent, but as you point out, that’s a small part of the population, most of the population that doesn’t happen for a period of time.

10:30

So, you know, the Zillow rent, increase is not representative of the rent.

Increase the most people are facing, you know, at any given point in time, so that, but there’s broadly speaking that that’s actually good news.

That Zillow is reporting Market.

Rents are Rising as fast, that will ultimately start showing up in the Bureau of Labor Statistics measure of inflation Consumer Price inflation.

10:51

Probably, I’m my guess is very late this year going into next year.

We’ll start to see that roll over which is, you know, we need that because you know, right now it’s adding a lot to overall inflation, right?

I don’t want people’s eyes to glaze over with the sort of methodological back and forth, but I think it’s important because it cashes out as if Zillow rent Inflation peaked this spring.

11:16

We should expect shelter inflation to maybe come down this winter, which means that in a really critical part of core inflation, might get a little bit of relief in.

Let’s say, November December January it.

11:32

Is that is that a fair way to summarize this methodological back and forth then yeah, this could happen.

Yes, you’re putting too much weight on Zillow there, you know, I’m not sure there’s other better, you know, Market rent, you know, That actually show rent growth peaked in the summer.

11:49

So that would suggest very late this year, probably more likely early next year, when it really starts to show up in slower, increases in rent, CPI Consumer Price Index at the Bureau of Labor Statistics, actually measuring.

Okay, great.

I’m glad we did that.

I do actually think it’s really important that people understand that rent is just an extremely strange, weird.

12:11

It’s a third of the CPI one-third of the the total Consumer Price Index is housing and you know as we as you can glean very complex, a lot of moving parts and difficult to measure, let’s move on to the National Housing picture.

So in the most recent case, she’ll report on a seasonally adjusted basis.

12:29

Prices are down in seven of the 20 cities that case-shiller looks at prices for homes or down in Seattle, San Francisco.

San Diego.

Portland Los Angeles, Denver and Washington, d.c. do you?

Mark, think we are looking at a housing stall in the next year, or a more meaningfully or a more meaningful.

12:51

I should say decline in housing values across the country.

Well, I think directly word, I use is correction.

I think prices are going to decline.

I don’t stall means basically go flat and it feels like they’re going to decline and that goes to the surge in mortgage rates.

So we got high inflation.

13:08

The Federal Reserve is on the warpath, raising interest rates, mortgage rates have jumped.

The 30-year fixed is going for Six percent.

Plus it was half that less than half that a year ago that conflates with the very high house prices that, you know, when low rates for low demand was high rates, prices jumped in many markets and now you have high house prices, High interest rates combined that it means, you know, the monthly payment that people have to Shell out to buy.

13:34

That home is just unaffordable so many potential first-time.

Home buyers are now literally locked out of the housing market.

So home sales have here all Is a strong word, they cratered, you know, we’ve seen a very sharp surprisingly sharp Alisa, I’m taken aback by how significant the decline in home sales have been.

13:55

And that means you know if sellers you know want to sell homes they’re going to start cutting price to move that home.

Then many cases sellers are going to take the home off the market because they don’t want to sell at a lower price they have in their going back to Zillow.

They saw the lad Zillow price.

They think that’s what their home is worth.

14:11

They’re not going to give up on that fast so it’s Gonna take a little bit of time, but as they come to the realization, oh, my home is not worth that and if I need to move, I’m gonna have to sell.

I’m going to cut my price so we are going to see some price to cleans and Nationwide.

You know under the assumption we don’t go into a recession.

14:27

I think we get National house price declines of five ten percent Peak to trough.

Something like that.

That’s in my nomenclature.

That’s a a correction.

It is said that there are more than 200 housing markets that are risk of 15 to 20 percent home price declines.

14:45

That’s a ton.

Where are those housing markets?

Give you an example of a few that you think are at the greatest risk of serious, but consider over vet.

Overvalued by, as much as 20%.

Looking at the price relative to the incomes in that area, the metropolitan areas doesn’t necessarily mean that price is going to fall by 20%.

15:03

It’s like stock market could be overvalued by 20%, doesn’t mean it’s going to fall by. 80%.

But nonetheless those are risk markets in most of those markets are places that really got Juiced.

You want during the pandemic, when rates are really low.

And you had a lot of remote work, people, believing big cities in the Northeast, they went into the South so Carolinas, Georgia Atlanta Florida over into Texas and then folks on the west coast, they California Seattle.

15:32

They moved into the Mountain, West, you everywhere, in, from Boise down to Phoenix and or get over.

Texas and then Chicago.

So big, urban area, Lots lost, lots of people, during the pandemic to remote work.

Many of those moved went South and West.

They went all over the country but the one common denominator is Texas.

15:50

Texas got folks from all over the place.

And so some of the most, you know, like Austin Texas is kind of one of the poster child for an overvalued market.

And I think if you look at the most recent data as a market, that is now seeing some correction and price.

The prices are starting to come in, but it’s really the South South Texas and up into the Mountain West.

16:10

That’s that’s where the prices have risen.

The most write, this sort of a lot of these sort of smile states that people say have been taking in a lot of imports from the Northeast and the Midwest, people wanting to move from North, say New York to North Carolina or California to Austin, or Los Angeles, add up to Boise.

16:30

These places got really, really frothy and 2020, and 2021, really interesting exception, looking at some of your research and some of Apps Florida.

And Florida is metros seem most resilience or are among.

I should say the Metros that are most resilient to these price declines that you’re describing.

16:49

Why is Florida resilient I suspect?

We’ll start seeing it’s showing up in Florida, I’d be pretty surprised if we don’t start seeing price declines.

It may be the case that more kind of retirees or there and they’re not going to sell, right?

They moved in paid the price, they’re not moving.

17:06

So you You don’t see the transactions yet, but I would be pretty surprised if we had this conversation.

Six months from now we don’t see some meaningful price declines in places like Orlando, Tampa Jacksonville, you know, South Florida a little bit less.

So but you know, the entire State feels pretty juice to me and I think we’ll see some corrections as there is also, if I don’t ask this question at all, someone’s gonna get mad at me and scream at me, so I’ll just ask it now, is this 2007 again when the housing crash help to wreck the global economy, Everything went to shit.

17:38

Is it 2007 again?

And if not why not, what, what, what word did you just use your allowed to say that?

I.

Yes, you are allowed to say go to shit.

Yeah.

Okay.

I didn’t know that.

Okay, I’m Liber.

I feel liberated somehow not that.

I’m going to say it, but I feel a little overrated at this point but no, I characterize what happened back in 07 08 09 010.

18:01

It was actually prices peaked in 2016, hit bottom, until 2011 five-year period.

Price, declines, that’s a crash prices were down depending on the index measure you use 20 25, 30 %.

No, because big differences.

One is the market is vastly undersupplied today, lack of homes.

18:21

Vacancy rates are record lows back then surfeit of homes over Supply.

Vacancy rates, very high second underwriting.

Standards lending has been very good, only 30 years or 15 years of plain.

Vanilla mortgage is no wacko - mmm.

18:37

Prime two-year arm loans.

So no problem there and I think it’s got a lot of investors in markets.

In these investors there.

They’ve gone to the sidelines and I think that’s one reason why you’ve seen sales collapse, but they’re in for this the Long Haul here.

These are this is now a business model to buy and rent homes.

18:56

Got a lot of institutional money, you know, big big Capital coming in, they’re going to come back in and you know, before prices crash in started, you know, they’re, they’re opportunistic but they’re going to say Start picking up those properties and I’ll put a proverbial floor on the price.

So correction not a crash.

19:13

I should say though 510 percent, if there’s no recession if we have a recession and obviously given the inflation data, but that means from interest rates, you know, we could go into recession and then the price declines will be 10 15 percent again, you know, not in the same league as, you know, the the financial crisis.

19:32

But certainly going to feel pretty pretty uncomfortable.

Let’s assume for the purpose of the of this.

Next question, only that we are going into a recession.

I think a lot of people tend to think by analogy, I certainly think by analogy if the spillover effects of the housing crash of 2007-2008 up, until it’s the as you said 2011, if the spillover effects of that were a Global Financial Calamity.

20:05

What would be the spillover effects economically speaking?

In the u.s. of a housing, correction nationally, of 15 percent, who would feel that pain?

Well, obviously homeowners, you know, I will say, though, you know, the homeowners that are going to suffer the most, or the ones that have benefited the greatest in the run-up in price.

20:29

So, take resident in Phoenix their house price over the past year up until recently Groove 30%.

So, let’s say they give back.

At 15% of that, 20% of that, 25% of that, 30% of that, there’s still kind of even with where they were two years ago.

20:45

So, you know, no big deal.

I mean, if you bought it the exact top of the market, well, you know, my feel uncomfortable, particularly if you put 5% down or 10% down, now, you’re underwater, meaning the value of your home that fell 15-20 percent is below the your mortgage amount.

21:01

And then, you know, if you have some disruption to your income in a recession, you lose your job, you lose hours, you can pay cut.

Then that’s the fodder for, you know, default people stop paying when that happens and can’t afford the home, and they probably gets foreclosed on that gets dumped into the market that kind of scenario.

21:19

If it was widespread that would be the fodder for a crisis, a crash won’t happen.

That’s what happened back in 08 and 09, but that’s, you know, very I just don’t see that happening now.

You know, just given everything else I said earlier, but something to watch.

21:35

And and, you know, certainly on the radar screen, you know, for as a risk to the to the economic Outlook, what’s on the radar screen for me?

In addition to the pain that Realtors would clearly feel from even a stall.

They’re already feeling, I think a lot of pain from a stall and might feel from a mild.

21:52

Correction mortgage lenders are going to feel it as well.

Someone looking to sell a house and bank that money for retirement, obviously it’s really bad for them.

What about the construction industry?

Are you worried that the construction industry could A little bit of the pinch from a prolonged stalemate or mild correction in the National housing market.

22:16

Yeah, sure.

I mean, in fact, you know, the FED is trying to slow the job market slow job growth.

So if they slow job growth to something less than 100,000 job increase per month, which is kind of their bogey.

Because that’s consistent with stable unemployment, and you don’t want unemployment to keep falling given the tight labor market in the wage pressures.

22:34

That means some sector of the economy has got to be at zero or losing jobs, right?

And that would be construction because that’s the most rate-sensitive second part of the economy.

So I would expect some loss of job limiting.

The job loss though is the fact that, as I said earlier, there’s a shortage of homes in the multifamily market is doing very well.

22:54

So people will lose their jobs building single-family homes because Builders stop building because people can’t buy the single family home, just can walk across the street start working on that multifamily project and there many of them in communities all across the country and then he got the infrastructure legislation that God.

Passed last year, that’s going to start, shelling out money, to build out infrastructure in 2023 and 2024, statute also help support construction job.

23:18

So I expect some declines here.

I think that’s by Design, but I don’t know that we’d see big declines because of the factors.

I just articulated.

I want to hold on.

The issue of housing supply for a second and construction because there’s a few things that are happening right now and I’d love you to help me sort of disentangle and make sense of it.

23:37

So housing starts It’s our down new houses being constructed are down about more than 20% since April.

But I’ve read your work that seems to indicate that construction cycle time has improved.

So when I put those things together, it tells me that we are starting newer.

23:56

We were starting fewer homes, but there’s all these homes that had been started that were stopped when they were all these supply chain gun cups.

And now those houses can be completed and that will add to housing Supply and housing supplies such Important issue because I think one of the huge problems this country has faced.

24:13

Is that in the 2010s after the crash as you said of the housing market and the Crash the construction industry we built fewer homes per capita in the 2010s that we had basically built in any other decade on record and which contributed massively to the price escalation of housings, the difficulty people finding housing.

24:30

And I really don’t want that to happen again even in an intra in a environment of rising interest rates.

So, do you see The construction is she right now, the housing Supply industry as being healthy because of what’s happening in multi-unit, residential buildings or are?

24:49

Do you think it’s vulnerable to a little bit of a correction, if rates continue to rise and the and economic growth starts to slip?

Well, there’s any correction, single family.

I construction is going to weaken and, you know, it would take a little bit of time to your point that there’s a lot of homes in the pipeline going to Lee Shin that have been kind of bottled up because of supply chain issues around building materials, and appliances.

25:14

And as those Supply chains, the iron themselves out those homes will get completed.

So in the, you know, the near future next 36 months will still see a lot of homes.

Going to completion, you won’t see the big declining because you will see a significant decline in construction employment.

But once that happens, because the new starts, the new building has fallen sharply, then we’ll start to see loss of employment in the single family home building industry.

25:39

Shooting the blow for construction generally, again, we’ll be continuing strong multifamily construction because rents are growing strongly lighted.

Demand for rental property because people can’t afford a single-family home, they’re going to rent and also the infrastructure jobs that will come, you know, in next year, in the year after Turning the global picture at home prices aren’t just falling in Austin and Seattle and Boise and Charlotte.

26:05

They’re falling in Sydney, they’re really falling in Auckland, they’re falling in Stockholm, they’re finally turning in Toronto Canada’s housing market has been crazy.

Why are we seeing this Global synchronize decline in housing markets around the world?

Well what’s going on here?

Is gone on in many other parts of the world particularly developed world rights.

26:23

Got very low, interest rates got low everywhere because of the pandemic that juice Up demand for housing, the most rate sensitive sector of the economy and just because most people need a mortgage to buy a home and you know to get that mortgage you got a qualifying to qualify.

Your income is going to be sufficient to cover the mortgage payment, which is in fact a which is related to the interest rate and also remote work.

26:44

Same kind of Dynamics and many markets, you know, people left big cities and went into other persons of their country juice to prices in those areas and and also you’ve got, you know, Circuit of housing in many markets because Many markets had the same kind of financial crisis, housing, collapse.

26:59

We did 10 years ago for, lots of different reasons.

And so they had the same kind of Dynamics here and so construction has been depressed in many parts of the world.

And so, you know, same factors of contributing to the to what’s going on here.

27:15

As is going on overseas.

One of the countries with the worst housing market at the moment is China, which just seems to have everything going against it.

You’ve got Real estate.

I don’t know what noun you would use.

Crash.

27:31

Correction that’s crashy correction.

Okay, we’ll use precaution correction, but it’s Crash.

So you’ve got a real estate crash.

You’ve got this covid 0 policy which is just awful for urban economics and Supply chains.

And you’ve got a country that appears to be entering a full-blown recession, you know?

27:51

Give me your outlook on the Chinese economy right now because what’s happening, there is very Infusing and fairly stunning to me.

Yeah, well, they got troubles.

They got a whole slew of the problems.

I mean, you mentioned the real estate collapse.

They built way too many homes.

28:06

That’s the one place in the world where we got too many homes, not enough homes.

You know, they got problems demographic problems there, populate the working age population is declining.

They got environmental issues.

They got they took on a lot of debt to kind of help them navigate through the pandemic and the financial crisis.

28:22

So Leverage is really very high.

You know, most importantly, I guess I’m uh significant I think they’re, you know, pulling back from the rest of the world.

There were, you know, they benefited enormously from globalization.

That’s the integration of the Chinese economy and other emerging economies into the global economy.

28:40

Beginning back in 2004, 20 years, they feasted on that growth but now we’re going backwards on that and Chinese are pulling back on.

Globalization they’re deep they’re not D, globalizing their they’ve stopped globalizing and that really makes them vulnerable you No.

28:57

So they got to they got to Hope set a very significant structural issues and you know, they’ve been able to kind of sort of paper it over with all the savings they built up when times were good and use that fiscal support in the government support to keep things going and are still doing that now.

29:15

But you know that that’s going to run out and of course I forgot the obvious, they know covid policy, right?

I mean so if there, if a case shows up somewhere they shut down cities big cities, you know?

Tens of millions of people kind of cities and that that, you know, economy is getting a love when you do that.

29:32

We saw that here in the United States when we shut down, they are shutting down and continually over there.

So you know, that’s another big problem they face.

So a lot of a lot of issues and China’s I think going to be, it’s going to be a slog for them for quite some time.

I’m trying to think about the ways in which the Chinese slowdown is going to affect the US economy and it’s a pretty blurry picture to be honest.

29:53

Because on the one hand, their supply Chain problems or their covid. 0 policy is our supply chain problem, because we have lots of multinational companies that rely on manufacturing and distribution in China.

Apple, for example, in order to get the stuff that we need to American Shores.

30:12

On the other hand, there’s a lot of people in China, they use a lot of gas when that economy starts to cool off or even start to starts to shrink.

That means there’s less demand for gasoline Nationwide, which means that energy prices might come down.

A bit which reduces headline inflation for the US, which means that maybe there’s less pressure on the FED to jack up, interest rates again and again and again, which is good for us growth.

30:36

So it’s confusing to me to try to say.

You know, this is overall a good thing for the US economy or a bad thing for the US economy.

Do you have a more educated way of thinking about knowing me?

I think you nailed it.

I mean, there’s a lot of cross currents here, you know, some positive, some negative, you know, the net of all that is, you know, probably can’t be good.

30:55

You know, for the global economy you This economy, it’s China is struggling.

I just can’t be a good thing, you know, on that.

But you know, at the moment there’s we’re taking a lot of Solace from the fact that oil prices are down from, you know, all time highs or very high levels.

31:11

And in terms of gas prices we were at all-time highs.

And in part is because China’s flat on its back, no demand for oil less demand for oil and that’s keeping oil prices down compared to where they would be otherwise.

So, in the current You know, maybe a net positive but you know, broadly speaking, it can’t be a good thing.

31:31

If an economy is struggling to the degree, that China is at this point and as you point out, you know, we need Supply changed iron themselves out.

You know, we can’t have any more shortages because that just exacerbates the inflationary problems, we began this discussion was.

So you know, it’s important that they get get things in order and continue to grow and expand and ultimately Thrive.

31:53

I can’t let you go without asking you.

The unfair question is making a prediction about About whether or not we are in or about to be in a recession, I’ll ask the question this way.

How do you reconcile the GDP numbers and the unemployment numbers because GDP is now officially declined to quarters in a row, which is not the technical definition of a recession, but it’s pretty recession.

32:18

Knee on the other hand unemployment is so low.

Monthly employment growth monthly job.

Growth is on fire.

You look at GDP it says if we’re probably kind of in a recession you look at the jobs numbers and it’s like there is no way in hell that we’re in a recession.

32:36

How does it cash out to you?

Yeah we’re not in a recession.

I mean, I do do a lot of forecast so it’s not an unfair question.

And, you know, some forecast I do I’m confident in some cons on not so much.

This one I’m highly confident in and this is not a recession that GDP number that probably reviva revised higher, but I’m not going to go down that path unless you want to go down.

32:56

That rabbit hole talked about.

We talked about how do we measure the rent inflation in the CPI, we can talk about GDP but it will be revised higher.

Probably, revise.

A way that the downturn certainly in one of those corners and more importantly, at the end of the day, you know, a recession is a broad-based persistent decline in economic activity.

33:18

If you’re creating hundreds of thousands of jobs, every single month, layoffs are at a record low unfilled positions or close to a record high.

That’s not a recession.

And I don’t think anyone you know, the official Arbors of recession is the business cycle dating Committee of the National Bureau of economic research group of nonpartisan academic Economist.

33:37

There’s no way they’re going to label this summer session.

One, quick follow-up.

Before I let you go.

Can you don’t go all the way down the rabbit hole?

We I don’t think we can do like 30 minutes on it, but maybe go like, you know, a quarter of the way down the rabbit hole, how how do you think GDP is going to be revised by the DEA such that it’s going to move from - of to flatter positive temperature.

33:57

First of all, I get revised a lot many times over the years and many down quarters that we’ve had in the past, have gotten completely revised away in subsequent recession.

So this is not uncommon in happens.

And the reason I feel strongly is gross.

34:13

Domestic income.

GDI, which is conceptually the same as GDP but measured differently.

Different stores data income, side of the accounts.

That’s one quarter of the way down.

I’m not going any further than that.

One quarter of the way down.

Been uniformly, positive.

34:28

Since the pandemic, it grew in the first half of the year that may actually get revised a little bit lower.

I wouldn’t be surprised but GPS going to get a revised higher, you’ll meet somewhere in between and that’s basically economy in terms of GDP, that was flat.

But in terms of jobs, it was booming which you know, to connect all the dots means that productivity growth in the first half of the year was weak, but it was really very strong in early part of the pandemic.

34:52

So, you know, kind of netted out, you know, Shows an economy that is still growing expanding not in recession.

Mark zandi.

Thank you very, very much.

Yeah.

Anytime Derek take care.

Now, I’m Jerry Thompson.

That was plain English.

35:07

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35:28

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