LIZ: WITH ALL OF THIS, WE’VE GOT
THE APRIL JOBS REPORT HITTING
THE TAPE, ABOUT WHAT, 17 HOURS
FROM NOW.
8:30 TOMORROW MORNING, WE GET
THE REPORT.
EXPECTATIONS FOR A GAIN OF
391,000 JOBS, AND IF IT COMES IN
THERE, HAD BE THE RECORD 12TH
CONSECUTIVE MONTH OF GAINS
AROUND OR ABOVE 400,000.
UNEMPLOYMENT, WELL, THAT RATE IS
EXPECTED TO FALL ONE-TENTH OF A
PERCENT TO 3.5%.
THAT WOULD BE THE LOWEST LEVEL
WE’VE SEEN SINCE PANDEMIC
STARTED.
JEROME POWELL SAID YESTERDAY THE
FED BELIEVES THERE IS A PATH TO
TAMING RED-HOT INFLATION WITHOUT
CAUSING A RECESSION OR PUSHING
UNEMPLOYMENT BACK UP.
>> WE NEED TO DO EVERYTHING WE
CAN TO RESTORE STABLE PRICES.
WE’LL DO IT AS QUICKLY AND
EFFECTIVELY AS WE CAN.
WE THINK WE HAVE A GOOD CHANCE
TO DO IT WITHOUT, WITHOUT
SIGNIFICANT INCREASE IN
UNEMPLOYMENT OR, YOU KNOW, A
REALLY SHARP SLOWDOWN.
BUT ULTIMATELY, WE THINK ABOUT
THE MEDIUM AND LONGER TERM, AND
EVERYONE WILL BE BETTER OFF IF
WE CAN GET THIS JOB DONE.
LIZ: WELL, SOME OF THIS IS IN
QUESTION AT THE MOMENT.
JOINING ME NOW WITH A BRILLIANT
MACROECONOMIC CONTEXT IS CHIEF
ECONOMIST DIANE SWANN.
DIANE WITH, FIRST, WHAT IS YOUR
EXPECTATION FOR THE JOBS NUMBER
TOMORROW FOR THE MONTH OF APRIL,
AND IF IT BECAUSE EVEN BETTER
THAN WHAT THE WORLD IS
EXPECTING, WHAT DOES THAT MEAN
FOR THE MARKETS AND FOR WHAT JAY
POWELL SAID IS HIS PATH FORWARD?
>> WELL, IT’S REALLY CRITICAL.
I THINK WE COULD SEE MORE THAN
400,000, CLOSER TO 450,000.
THAT WOULD BE ABOUT THE SAME, 4
IF 1,000 THAT WE SAW IN MARCH --
431,000.
THAT WOULD HAVE BEEN AN OKAY
YEAR MT. 2010s MANY ONE
QUARTER.
AND AT THE SAME PACE WE SAW IN
2021.
WHAT’S MOST IMPORTANT ABOUT THE
JOBS SITUATION IS SORT OF AN
UNTOLD STORY HERE THAT IS
UNPACKED IN THE DATA THAT WE GOT
TODAY, AND AND YOU NAILED IT
WHEN YOU TALKEDDED ABOUT UNIT
COSTS GOING UP.
THEY ROSE AT THE HIGHEST RATE
SINCE 1982.
EMBEDDED MANY THAT, YES, WAGES
ARE ACCELERATING, BUT NOT AS
FAST AS INFLATION.
LABOR COSTS ARE GOING UP FASTER
THAN INFLATION BECAUSE
PRODUCTIVITY HAS PLUNGED AT ITS
FASTEST PACE SINCE 1947.
THE CHURN IN THE LABOR MARKET,
EMPLOYERS HAVING TO REPLACE
WORKERS, PAY UP AND TRAIN THOSE
WORKERS, EXCUSE ME, THOSE
WORKERS, THAT’S COSTING US
PRODUCTIVITY.
AND LET’S FACE IT, IN THE HYBRID
WORK FROM HOME ENVIRONMENT IT
INITIALLY BOOSTED PRODUCTIVITY
GROWTH BECAUSE WE ALL ALLOCATED
MORE TIME THAT WE WEREN’T
COMMUTING TO OUR JOBS, BUT IT
DOES MAKE IT EASIER IN A VERY
TIGHT LABOR MARKET WHERE JOB
DEMAND, IT’S SO EASY OUT THERE.
PEOPLE ARE TAKING ZOOM CALLS AND
INTERVIEWING IN BETWEEN MEETINGS
AND GETTING PICKED OFF.
I THINK THAT’S REALLY IMPORTANT
TO UNDERSTAND, THAT CHURN BEING
VERY COSTLY.
AND IT’S ONE OF THE THINGS THAT
KEEPS THE FED AWAKE AT NIGHT
BECAUSE WHAT THAT MEANS IS THAT
YOU CAN’T HAVE WAGE GAINS THAT
IMPROVE LIVING STANDARDS.
INSTEAD YOU’RE HAVING WAGE GAINS
THAT ARE ACCELERATING BUT NOT AS
FAST AS INFLATION.
THEY’RE CHASING INFLATION,
CHASING A MOVING TARGET, ERODING
LIVING STANDARDS.
AND AT THE END OF THE DAY, EVEN
CHAIRMAN POWELL ADMITTED
ALTHOUGH THERE IS A PATH -- A
VERY NARROW PATH CONCERN TO GET
TO THAT SOFT LANDING, HE ALSO
QUALIFIED IT, SOFTISH LANDING.
LIZ: UH-HUH, HEARD THAT.
>> KIND OF HARD, TO ME.
AND OUR REAL ESTATE IS THAT
CONCERN REALITY IS THAT WE THINK
WE’RE GOING TO HAVE TO SEE
UNEMPLOYMENT RISE ABOVE 5%
BEFORE THIS INFLATION IS BROUGHT
BACK DOWN TO THE LEVELS --
LIZ: THIS IS THE ISSUE, THESE
GREAT JOB OPPORTUNITIES FOR
PEOPLE, I MEAN, FINALLY.
IF YOU THINK ABOUT THE REST OF
THE WORLD NOT JUST THE C SUITE
WHO’S ALL WORRIED ABOUT, OH, I
HAVE TO PAY WORKERS MORE, THIS
IS GREAT FOR, UNDER NORMAL
CIRCUMSTANCES, FOR THE ECONOMY
THAT THERE ARE JOBS PLENTIFUL
AND THAT PEOPLE HAVE CHOICES.
HOWEVER, WITH IT PAIRED WITH THE
INFLATION THAT WE SEE, WHATEVER
JOB GAINS THEY GET ARE BEING
SUCKED UP BY HIGHER PRICES THAT
THEY HAVE TO PAY EVERYWHERE.
WHEN YOU HEARD THAT JAY POWELL
SAID YESTERDAY, RIGHT DURING
THIS HOUR, I’M TAKING 75 BASIS
POINTS THAT WE ARE NOT ACTIVELY
CONSIDERING ANY HIKES BIGGER
THAN 50 POINTS, WHAT WAS YOUR
FIRST THOUGHT?
I MEAN, CAN HE REALLY TAMP DOWN
INFLATION WITH PIECEMEAL 50
BASIS POINT HIKES HERE?
>> I DIDN’T SEE IT AS PIECEMEAL.
I MEAN, HE PUT IN 50 BASIS
POINTS IF THE NEXT TWO MEETINGS
WHICH GETS THEM ALMOST UP TO THE
NEUTRAL RATE, AND THEY WANT TO
GO BEYOND IT, AND THEY’RE
INCREASING THE PACE AT WHICH
THEY REDUCE THEIR BALANCE SHEET
BY DOUBLE WHAT WE SAW
PREVIOUSLY.
AND THAT WILL BE FULLY IN PLACE
BY AUGUST.
THE REDUCTIONS IN THE BALANCE
SHEET AMPLIFY RATE HIKES.
IT’S ONE OF THE REASONS WHY
WE’VE SEEN SUCH AN EXTRAORDINARY
RISE IN MORTGAGE RATES RELATIVE
TO THE 10-YEAR TREASURY YIELD.
AND I THINK THAT’S VERY
IMPORTANT TO UNDERSTAND IS THAT
SMALL MOVES OFF OF THESE LOW
RATES HAVE OUTSIZED IMPACT ON
INTEREST EXPENSE.
AND THAT’S SOMETHING PEOPLE LOSE
IN TRANSLATION AS WELL.
IT’S VERY COSTLY.
I DID A CALCULATION JUST ON
AVERAGE MORTGAGE COSTS AND HOW
MUCH THEY’VE GONE UP WITH VALUES
SINCE DECEMBER ALONE TO APRIL.
HOME VALUES HOLD IN APRIL AT THE
MARCH LEVELS, IT’S STILL OVER
$500 A MONTH.
THAT’S EXTRAORDINARY.
LIZ: IT IS.
AND IF WE LOOK, WE CAN SEE THAT
THE HOME BUILDERS ARE GETTING
CRUSHED ALONG WITH THE REST OF
THE MARKET.
WE DO HAVE, OBVIOUSLY, A BIG
SELLOFF HERE.
DOW JONES INDUSTRIALS DOWN 1,212
POINTS AT THIS MOMENT WITH 17
MINUTES LEFT TO TRADE, AND THE
HOME BUILDERS, YOU CAN SEE ON
YOUR SCREEN, THESE ARE
INCREASING LOSSES HERE, BY THE
WAY.
JUSTIN ABOUT EVERYBODY’S DOWN
5-6% OR MORE.