Moody's Talks - Inside Economics - Consumer Prices & Catastrophic Hurricanes

Episode Date: October 11, 2024

Matt Colyar and Adam “Hurricane” Kamins join the podcast to discuss this week’s inflation data and the economic impact of Hurricane Milton. The team parses the latest CPI report and debates whether inflation is “sticky” or “moderating”.  Adam discusses his work on estimating the economic damage from the recent string of devastating hurricanes. The team also discusses the potential longer-term fallout on housing and migration in storm-prone areas like Florida.  For the paper on the impact of homeowners insurance on housing affordability click hereGuest: Matt Colyar - Assistant Director, Moody's AnalyticsGuest: Adam Kamins - Senior Director, Moody's AnalyticsHosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X' @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics. I'm joined by a few of my colleagues, two of my trusty co-hosts, Chris D.Reedies and Marissa Dina Talley. Hi, guys. Hi, Mark. Hi, Mark. Hi, guys. And we got Adam, Adam, Adam Kamens. Adam Hurricane Kamens. I like it. Yeah. We're going to talk about the hurricane and what that all means.

And then we got Mr. Collier, Collier, Matt Collier. damn you, Matt. You make me say your last name. What the hell? Sorry about that, I guess. Nice to be here. Nice to see everybody. He forces me, a listener.

The dear listener, he forces me to say his last name. He knows like I'm going to mess it up and embarrass myself. But yet he makes me say it every single time. You could feel that look. I was giving you waiting. I could feel the look. I can feel the look. All right.

We got a lot to talk about. We got inflation CPI. That's Matt, always here for the CPI number. and we got the hurricane and what all that means, and we got Adam, and we're going to play the game, the stats game, and a lot to cover here. Everyone feeling okay? I mean, I'm a little, I don't know, I'm on edge.

I don't know why. Three weeks from the election, hurricanes, tornadoes, and Vero Beach, you know, I don't know. It all seems very cataclysmic. Doesn't it? It really? Yeah. Geez. I don't know.

How do you, Chris has always. Chris is always the optimist. How do you feel, Chris? I'm feeling good. Filling good. Inflation nice for inflation reports we'll get to. You know, things are going along here. You know, I got a, I got to, you know, get some of that good feeling.

We'll see how things go here. I'm sure it will all play off. Just, just fucking. Don't read the news. That's the secret. Right. Don't read the news. Don't look at.

Be a very uninformed economist. Don't look at the social media. Don't do anything. Take a walk. Take a walk. That's a good idea. That's a good idea. Oh, that's the other thing.

That's the other thing. This is the first cold day in Pennsylvania. So I go to turn on my heat and guess what? Doesn't come on. No heat. No heat. I go, you know, just one more thing that's bugging me. You know, one more thing that's bugging me.

But anyway, the economy's good. That's for sure. Okay, Matt. What's the deal? Tell us about the CPI. So we got September's Consumer Price Index Report yesterday. I was a little surprised by Chris there. He was very optimistic. I don't think it was a terrible report, but it wasn't the one that we wanted. It was stronger than expected. So caveat, that, I don't think it alters the longer term view, but in general, it was on the high side. Headline inflation. So hopline CPI number rose 0.2.2. percent from August to September. That was above expectations by a little bit. Rounded up slightly.

It lowered the year ago rate from 2.5% to 2.4%. So that's kind of your attention headline-grabbing thing. It was comforting. Right? 2.4? That's like, you know, right down where you want it to be. The target for the feds, too, on the consumer expenditure deflator and give and construct, but these are different measures.

CPI always runs a little stronger because of the weights and everything else. So 2.4 is like where you want it, right? No? Yeah. It is. And I think if you look at the monthly change, if you just took, for a whole year, we got changes just like we got in September. So an annualized basis, we would be at 2-1, 2-2.

So even better, even closer to the Fed's target. So that's- No, no, wait. The Fed's target is up for the consumer expenditure deflater. Given the normal margin between the two, I'm taking that. in consideration. You're right. Yes, it would still be 2.2. PC runs a little bit lower.

We'd be at the Fed's target. So I think it's an encouraging detail, but energy prices were a big drag. You're not going to bring us down. This is the whole conversation is going to be, I can feel it right now. Matt's going to, I'm already on edge. You did say you were edgy. I'm on edge and he's determined to today take this in a negative direction. Do you get my, this, Mercer, am I wrong?

Well, Mark, we need to have some balance here. Okay. All right. All right, let a rip, Matt. That's good. Buckle in. I'm not, I'm going to be in a non-remood. You can tell.

I'm an optimist by nature. So energy fell quite a bit in September, and you're not going to get that every month. Wait. So you said point two, this is top line. That's the whole shooting match, energy, food, core, so-called core, which is ex-food energy, a point two in the month, 2.4. and now you're breaking it down for us. That's right.

Okay, so you're going to go to energy first. Yes, energy prices fell 1.9%. Within that, you have gasoline. This is all pretty well advertised ahead of time, just based off what we see in energy markets. Gasoline prices fell 4.1%. The gallon of gas fell about 20 cents, if you look at it from August to September.

So all encouraging stuff, but not relatively sustainable, but good to have right now. Energy services, which mostly captures electricity prices, and most electricity generation comes from natural gas prices. They rose 0.7%. That was a bit of a surprise. Natural gas prices, it takes a little bit of time for utility companies for these increases in prices to pass through to consumers. June, a little bit of a rise in natural gas prices, but they really have been falling. They're flat, right? They've been falling since mid-June, and now, I've flattened out. So I was surprised for that, but it's the kind of thing you can expect doesn't repeat in October, I think, pretty reliably.

But we were basically our, you know, breaking down our forecast by component. That was like something we expected to be a flat. And the 0.7% increase was, uh, right, explained some of our miss. And of course, there's a lot of anticipated demand for electricity, you know, related to data centers and AI and all that kind of stuff. If you saw that deal between, or I think it's a deal between the state of PA and who is it? Is it Microsoft to restart one of the reactors at the Three Mile Island to produce more electricity? So, but that's down the road. That stuff, that's not affecting electricity prices today, this potential demand.

Yeah. So that short term, is it short term noise most likely, but enough to kind of throw a little bit of cold water. The bigger story, and it hasn't been a story in a while, is the increase in food prices. So just top line food, 0.4%. But within food, effectively, the Bureau of Labor Statistics breaks it out by grocery stores and restaurant price, food prices. And grocery store prices, the CPI for food at home, rose 0.4%. The fastest monthly growth in almost two years. longer term picture only up 1.3% from a year ago.

So not runaway inflation here, but a stronger month than we've seen. It's also the first time in two years, which is something I watch, just given all the attention that grocery store prices get, and these are necessities and consumers are very, you know, acutely sensitive to grocery store prices. First time in almost two years that average hourly earnings rose by less than grocery store prices. So in that battle of being able to, you know, afford more food and that squeeze at rising prices have put on families, not a great month there. Within food at home, you're looking at a really sharp rise in fruit prices. So fruit and vegetables garnered a lot of headlines.

You've got a 2.2% jump in the CPI for fresh fruit. Not something I spend a ton of time thinking about up to this point, but you have, especially oranges, I think, are a good case in point. There's an invasive bacteria that's really limited production, puts up orange juice prices, orange prices, other citrus as well. Bad weather is a big component. So, you know. I saw eggs, aren't eggs up again, avian flu? And that's the kind of the clearest cut supply issue is avian flu is really limited egg production.

So 8.4% jump in egg prices. They're up about 40% year over year. Beef and pork, we're up more than they have been. I don't have a great rationale as to what happened in September or if that's just kind of monthly movement. But again, this is a real stretch, but I'm not even sure this works. I'll just mention it because the port strike, because we knew the port strike was going to affect most significantly fresh fruit, right? Bananas and apples.

And I think that's where we saw also some big increase in price. Is that, can you connect those dots? or? I think it's conjecture. I mean, there's a story there, but, you know, and markets did react as it became very clear in September that this agreement wasn't going to be reached. You did see, like, you know, contract prices for various, for did rise. How that flows through and what the government's actually measuring. I don't, I don't have a ton of confidence that that's that's like a futures price. It's not the actual bot price, right. Which I'm sure flows through relatively quickly, but not the kind of thing I have a ton of competence using is.

It's like an explanation for September. So bottom line on food, you're saying, yeah, it was up more than we expected, you know, obviously disappointing, but it feels like a bunch of one-off stuff that's hard to explain. I think so. If you don't have a great explanation, I think the easiest one is that this is going to be a continuing trend that we see. So excluding food and energy, if we move to core CPI, there, the increase from August, September to September was point three percent second month in a row a touch higher than

expectations like this is where the disappointment is right I mean the overall was fine but the core X food and energy this is this is where you're saying it's on the hot side um yeah if I I could would characterize it is we got an upside surprise and we can't blame it on shelter so for me that's that's how I would characterize it that's most evident in in core CPI but but you know if that's the the drum we've been banging especially in August that not we, everybody really, that it's been a shelter story and all of that idiosyncratic measurement stuff. And that wasn't the case in September, which makes me, gives me a little bit of pause, more than my colleagues, evidently.

The three, that's my three point three. Chris. What does that mean, Matt? Nothing in particular, but there was, yeah, markets agree with, markets barely reacted. I mean, I didn't expect it to be. The sky was falling, but I think two years, yield rose like four or five basis points. So it didn't seem like the rose, four or five basis points? It rose. I'm sorry, fell five basis points on yesterday.

And I don't know exactly what I was expecting, but not long ago, consensus was a 50 basis point cut in November. Now it's pretty solidly 25. I thought there would have been some more movement there. But yeah. So year over year for core CPI rose from 3.2 to 3.3%. We expected to stay at 3.2%. So the higher number.

We are forecasted for point two. It came into point three, lifted the year ago rate. So what on the core side, excluding food and energy, caused the big increase? Again, not to put words in your mouth, but it felt like these kind of idiosyncratic one-off things. But correct me if I'm wrong. Big transportation services, which is something we've talked about. So auto insurance rose 1.2%. That's the kind of thing that we're relatively confident.

We know what's happening in the vehicle market. It can't keep costing more to insure these cars if they've been falling for a year. But that's much more of a triple the share of consumption as fruit is. So a surprise there really does move the needle. Auto repairs rose a percent. Airfare was up 3.2%. They all fall under the umbrella of transportation services. And just to complete the thought, if you go back,

the motor vehicle repair and insurance, what you're saying is, look, that's still a reflection of the increase in vehicle prices during the pandemic because of the shutdown of the industry and the collapse of inventory. But we've seen prices, both new and use, come in pretty significantly here over the past, I'd say more than a year now, on the use side, at least a couple, maybe even a couple years. That hasn't translated through yet in terms of repair and maintenance. We're still feeling, but that we, your sense is, again, I'm putting words in your mouth just to see if I've got it right, is that that's going to happen. That's, that's coming. Maybe the prices won't decline for repair. I don't think that or insurance, but at least they'll stop rising at 1%

every single month. I would even go a step further and say that rolling over has happened. October was weird, but we were for long stretch insurance was raising, you know, growing 1.5% percent per month. And we have seen slowing, but September was more of a return to it. So largely, yes, I definitely agree. Okay. Within core two, I just think this story, if it was two reasons why it was little hot, it was food prices, and then just kind of the drag on overall inflation, you know, headline or core that we were getting from falling goods prices,

I think that's diminishing. So vehicle market is the best, you know, clearest thing to point to there. New vehicles rose 0.2%. They've fallen almost every month in 2024. They're down a percent relative to a year ago, but you see a modest, you know, slight increase in September. Used vehicles, same thing. They're down 5 percent relative to a year ago, but rose 0.3 percent in September. We don't expect any kind of, you know, turnaround and acceleration in vehicle prices. But it's pretty reasonable to suggest that things have bottomed out and that kind of drag that we've been getting on inflation is not going to keep coming. It's going to be more, you know,

sideways movement, which means the rest of the stuff has to kind of comply, shelter, all those things that we've been waiting for, become more of the story because the help, the negative contribution from falling goods prices. Apparel, similar story, rose 1.1%. Those things have been falling for a while, but jumped in September, or at least increased for the first time at a while. So that's the general story that I think explains the report. Well, I guess the good, it just feels like to me there's a lot of volatility in the data month to month. And this was a particularly volatile month, things that you, big, big moves and prices for certain products and services, some of which we can explain away by avian flu, for example. but some of which we can't, we don't know, but you can't explain it. It feels like that's more

noise than signal. That, you know, that's more, it's not something fundamental going on here. It's something that, you know, will get washed out in subsequent months. The two areas where that may not be the case, and these work at cross-purposes in terms of overall inflation, you mentioned shelter, and it does feel like shelter, the growth and the cost of housing for rent and for homeownership is now, it's moderating and given last this month's read, moderating in a more consistent way. But on the other side is healthcare, and health care seems to be quite strong. And that feels like there's something more fundamental going on there.

Do I have that roughly right? For sure. The next point was going to be medical care. Okay. And we've got a beat on that that takes longer in this as an industry to digest. increased labor costs from the pandemic. All those things are working their way through to consumer prices, even though the way they actually,

the CPI measures health insurance costs is different. But if you look at kind of underlying components, those prices are rising just at a slower rate than, you know, how labor costs flow through restaurants. Those are pretty immediate. It takes a lot longer for healthcare providers to negotiate with insurance companies, negotiate with nurses, unions,

and there's increased costs flow through to consumers on a bit of a lag. So we're seeing some of that. 3.6% year-over-year for medical care services. That's rising pretty steadily. We expect that it's a little over 4% is where it peaks. But, yeah, moving the opposite way of shelter, which is falling. On a year-over-year terms is steadily slowing, stubbornly, but steadily. Hey, Chris, to comment on the cost of shelter or housing,

What did you take away from the report? Yeah, that's the source of my optimism. Optimism. We're seeing that come in nicely, kind of matching our expectations. And so, you know, we want to be cautious here. It's a single month, but it seems to be moving in the right direction here. We'll continue to see some deceleration. And that goes to the fact that we can observe rents, market rents.

and they've been almost universally across the different measures that are out there, apartment lists, Zillow, so forth and so on. They've been flat for,

I think, two years now, right? Yeah, pretty much. Yeah, so, yeah.

So that should show up at some point. The BLS uses rents to calculate the cost of housing. So if rents, market rents have been flat for two years, then, you know,

with a lag for lots of different reasons, it should show up in, much slower growth in the CPI, consumer price index for housing. And that feels like that's, it had been happening, but we were getting a little frustrated that it was happening so slowly. But now it feels with these numbers more like it's happening now. Finally, we're getting it.

Yeah, we had a bit of a head fake last month, if you recall. There was kind of an acceleration all of a sudden through markets off a bit. But now it seems like we're getting back to that slowing trend that we saw previously. Okay. Okay. So, Matt, you know, add it all up, you know, there's this debate, ongoing debate out there, reasonable debate, is inflation going to continue to moderate, you know, back down to the Fed's target, or is it going to remain more sticky and not go back in or may even begin to accelerate? Given these numbers and your sense of things, where do you, where do you land on that question? I don't think my view has changed. I think it's a matter of pace,

but there's little reason to expect. I don't see what the block would be. What's the obstacle that needs to be overcome? Shelter prices are falling, and that's really all it takes for the for return to the Fed's inflation target. And I think the most reasonable argument is that what we're seeing continues. Maybe it takes a few months longer like it has been slow. But yeah, not a great report, but nothing to alter my view that inflation's heading in the right direction. So you're not in the sticky camp. You're in the moderation camp. You give me a quarter or two of stickier wage growth.

If we start to level off at 4-1, 4-2. Don't talk to me like an economist, blah, blah, blah, blah. I didn't say one hand of it. Come on, give me the bottom line. No, I'm an optimist beside the contrarian start to the podcast. That was not pejorative of economists, but, well, maybe it was. It was kind of pejorative. was sorry about that. Do you see how he was dancing though? He was dancing like he was dancing around.

Back to your job. Yeah. I'm happy. Yeah. Exactly. Okay. Okay. That's the way to frame it. The sticky camp and the moderation camp. Marissa, are you in the sticky camp or the moderation camp? I'm in, I would say overall, I'm in the moderation camp. I think there are components of inflation. There are things out there that are clearly sticky. But I'm focused on what shelter's doing, right? Because that has been the biggest contributor to inflation. It continues to be over the past couple of years. So that's sort of where I'm laser focused.

If that keeps moderating, then I feel good about the rest of inflation. And I think all these other components, food and some of these other things we've talked about, I think particularly food is probably just volatility based on these supply constraints or, you know, exogenous factors that are influencing the price of food. So, yeah, I'm in the moderation camp. Moderation camp, okay. Chris, are you the sticky camp or the moderation camp? I'm with Marissa.

We're with Marissa. Overall, certainly moderating, but there are a few components we need to watch. out for. Right. And Adam, do you have a view on this? Sticky or, sticky camp or moderation camp? I'm going to be boring and agree also. I think, if you take the long view, it does seem like all of the components are generally moving in the right direction and that most of what we're seeing that any evidence of stickiness does seem to be more volatility than anything else. Right. Right. Well, this gets to the producer price index, because we got that also for the month. And then what CPI and PPI mean for the consumer expenditure deflater, which that's next week,

isn't it, that we get it next week or maybe it's two weeks from now, two weeks from now. And, of course, again, that is the headline inflation measure. Overall consumer expenditure deflator inflation is what the Fed is using for its 2% target. And so given the CPI and given the PPI, Matt, do you have a sense of what the PCE, the consumer expenditure deflator will be? Our first estimate is that the headline PC deflator will rise 0.1%, which will lower the headline rate to 2%. Ooh.

Two point, yeah, which is... Really? 2% on the nose. There you go. I will say our quick, Justin and I are working on this morning since PPI came out, we're on the lower end and I'm going to have a better sense of why. I mean, it's usually a pretty tight band just given that we have all the input data from the CPI and the PPI.

So that's a good thing. Core 0.2%, which will lower the year ago rate to 2.5, or core PC. And why? Because the core CPI is 0.3, and we know that the weights in the CPI are higher on housing than on medical care. I believe they're reversed in the consumer expenditure inflator, which would suggest that we get a stronger number in the core PCE. as opposed to course CPI, but we're not getting that. What's the reason for that? The first is that like medical care, the medical care that we see in the CPI, which was

concerning, that's actually not what, that's, that's one of the components that we use the PPI. And there it was better, it's a better story. So hospitals, physician services, those two things, it's a little tougher to untangle month to month changes because at that level, it's not seasonally adjusted, but 0.10%, no, no change in those components, whereas physician services rose like 0.9% in the CPI, what actually flows through to the PCE comes from the PPI. It was much more mild.

Interesting. Yeah. Right. And also, I guess, motor vehicle insurance and repair, isn't that also from the PPI? That does come from the PPI, but I don't know exactly what that did today. Okay. Okay. Okay.

Two things are measured differently in the, um, the, um, the PCE versus the CPI. So things like insurance, they're netted out when PCE is computed. So if you, it's not just what the consumer pays. It's also what the consumer would get back in a claim from an insurance company. So there is some measurement differences with some of those like imputed costs versus net and net costs in the two surveys. So they're not really apples to apples. Did I tell you guys my experience with the motor vehicle insurance and the driving test? Did you, did I tell you this? No. Okay. So I got my motor vehicle insurance bill, and it was eye popping, right? Extraordinarily, huge increase. So I, you know, I never have called up my insurance company ever,

but I called them, I won't tell you who it is, but they'd advertise on TV. So I call up the, and it took me a little bit, but I got to somebody, and they were very nice, very helpful. And it turns out, you know, I had a lot of tort protection and I probably didn't need it. So I scaled that back and I got my insurance premium down a little bit, not a lot. And then the fellow says, well, you know, we've got this program where we track your driving with your cell phone. Well, I did. I did it. I made the mistake.

I said, oh, that sounds kind of cool, kind of interesting. So everyone in my family got the got into the program. And of course it turned into a contest, like who's the best driver? Who's the best driver? And it turns out the best driver actually is my youngest daughter, which is great. You know, made me feel really good. They test your braking. They test your acceleration, time of day.

Who else? I don't know who else are tracking. And they give you a score. And she turned out to be the best driver. She drives like an old lady, you know, which is, again, I'm all for it. That's not necessarily a good thing. Well, I don't know.

Tend not to get into accidents. I won't tell you who the worst driver it was. The only thing I'll say about that is it wasn't me. It wasn't me. Exactly. But here's the thing. Here's the thing that really got me. My insurance premium went up.

Not down. Really? Are you kidding me? Are you kidding me? Anyway, I would unenroll from that program. Oh, I'm done. I'm done with that. Yeah, I'm done with that.

So there was a big expose written about this. Oh, really? Oh, geez. And that basically insurance companies, they will only penalize you based on your driving. They won't actually reward you for your driving. Oh, really? And they're using your data in a whole bunch of other different ways potentially. That's outrageous.

that. Yeah, I'll send you the article. Yeah, please. Yeah. It's distressing. I should have talked about this earlier. But anyway, so I'm definitely shopping next year. Just saying, I'm going to be shopping. And this is like your insurance went up on the same vehicle. You didn't get a new car or anything. No, no, no. Yeah. Yeah. See, I got a new car and mine went up substantially. By the way, I've been in a new car. It's like I'm in a spaceship. It's a really cool car. Yeah, really cool car.

It is. So I don't know how much of it. I went from having a really old car to a brand new electric car. So I was expecting it to go up, but the amount that it went up was really shocking. And I don't know how much of it is like just the new car versus them taking the opportunity to adjust my rate. And I didn't call them. Yeah. You can see why there's this disconnect between the Happy Talk.

like economists like us and the average American family because they get something like that. It's like it's hard to look beyond that, right? I mean, just really. And by the way, that all goes back to the pandemic, you know, pandemic hits, chip plants shut down globally, no global production, inventories collapse, prices go up. It ultimately shows up in repair and maintenance costs and then insurance, you know. So it's direct effect of the pandemic. Anyway, talking about insurance, unless anyone else to say on inflation or the CPI or PPI or PCE, anything before we move on to Adam Hurricane Payman's? I'll just say I got my home insurance bill.

That was a shocker. Was it really? Yeah, 30%. Wow. Increased over in the previous year. Yeah. And in Pennsylvania, right? Why?

What do you suppose that is? What are you guys doing over there in that? Have you ever filed a claim? I've never filed the claim, nothing like that. So just a, oh my goodness. And I shopped around. I guess I was getting a good deal previously perhaps because I can't, I can't beat it. Anyway, just to go to your point.

Yeah. Well, this is a segue. Great segue into what's going down in Florida and the southeastern part of the United States. And I should say, you know, obviously we, our thoughts and prayers go to all the folks there in that region of the country because that, you know, that's pretty tough. So a lot of hard work dead ahead. But Adam, you want to give us a sense of this most recent hurricane, Hurricane Milton, and how you're thinking about it in terms of its economic consequence? Maybe you can just give

us also kind of a broader sense of the framework you use to try to understand the economic impact of a storm like this. Sure. Yeah, I'll start there. I'll zoom out a little bit. There's a lot of different ways to think about these storms. So we've been doing this for a while. And what we typically look at when a hurricane or other sort of event, natural disaster occurs, is lost output and physical damage. So the lost output number, where basically just looking at the counties that are affected, trying to understand the size of the economies, what types of different industries, their concentration. in how those industries might be affected, how long those places might be shut down. We rely pretty heavily on maps of power outages across counties.

So it's pretty clear that when a large portion of a county is without power, their economy is not going to be doing much of anything. So all of that factors into the lost output piece. That is the smaller piece of the number, but I think that's the piece that has broader macroeconomic consequences, and certainly in terms of like the variable. that we think about. The other larger piece is around damage. And so to get a sense of the damage,

we start by looking at the housing stock. You look at the median single family home price in an area. And then where we can, we pull information on commercial real estate, on the number of automobiles. We make some assumptions based on past events on how you can convert that into personal property outside of the actual home or the auto itself. And based on that, we come up with a range

of what we think the damage will look like. And it's probably important to emphasize that this is not an estimate of insured losses. It is just an estimate of, it's sort of an all-in estimate of all losses insured, uninsured, that can include things like infrastructure, other things that may not be kind of explicitly accounted for in insured losses. And in many cases, the insured losses can be a very small percentage of the total loss, right? Depends on, you know, what, where, who's getting struck, what's getting struck by the disaster, but often what's insured is actually not that big a piece of the pie. Exactly. And actually, these last two storms are a perfect example of that. So Helene, it moved up the coast in the southeast. It did most of its damage in the Carolinas,

particularly the area around Asheville, North Carolina, is where probably the most catastrophic damage occurred. But because most of it was flood damage, typical homeowners policies do not cover flood damage. So there's some level of insurance that people can get from the federal government, the national flood insurance program. But penetration rates for that sort of insurance are not very high. So a large share of losses from Haleen are uninsured. Whereas in Milton, where we have a lot of a lot more wind damage and sort of the traditional, in quotes, hurricane damage, the share of losses that are insured are going to be much higher. Got it. Got it. In the case of Haleen, what is your damage estimate?

So we've revised their damage estimate. We started a little bit. Which is not unusual, right? Because there's... Not at all. No, this is... There's a zillion uncertainties here, and as you get more information... I mean, a lot of moving parts in terms of trying to calculate this, right? Exactly.

I mean, anybody who estimates a day or two out from the storm and doesn't change their estimates, I would not trust them for a second. So we are now at somewhere between, again, we have a wide range here because there's still a lot that is unknown about this, but roughly 40. billion, we think, in damage, probably plus or minus 10 billion. So just to give you a sense of what that range may look like. Loss output, we're thinking somewhere in the order of $7 to $9 billion, with roughly half of that likely concentrated in North Carolina, particularly in the western part of North Carolina. So it's a relatively small area, both in terms of size and economic activity,

That's really bearing the bruntier. So those economies, and again, I point to Asheville as being the one that of all metro areas in the U.S. that's most affected, it's really a devastating blow for an economy like that. But compared to Milton, actually, the price tag is lower overall. So in terms of the macroeconomic picture for the U.S., Milton is probably the more severe of the two. So kind of what's the midpoint of your damage estimate for Haleem? And that's total damage, economic loss, plus insured, plus uninsured. We're not making a distinction there.

What is the total damage? Ruffly. Total, I would say the midpoint there is $48 billion. $48 billion. Okay. And again, this can be revised as we move forward here. It can and almost certainly will be revised. And as time goes on, that range will narrow to, right?

Right now we're sort of thinking about is a range of $38 to $58 billion. but as we get more certainty and see sort of just how extensive the damage is and rebuilding begins, we'll be able to narrow that range. Okay. And we'll probably, let's not go into the cost of Milton yet because we're still trying to figure that out. It's still early days. But it feels like, broadly speaking, it's going to be at least $50 billion, right,

in total loss. I think that's right. So Milton, one of the big differences between. I mean, Milton and Helene, other than what we talked about with the short rates and things along those lines, it's just where Milton hit and the extent of the disruption and the damage. So, Mark, you know this full well. You have a home on the Atlantic coast of Florida, which is not particularly close to where Milton made landfall, but it spawned tornadoes kind of throughout the state. the the wind was so strong and that there was enough rain that we saw a fair amount of damage really throughout Florida with the exception being the panhandle was on skates but outside of that

there's really no part of Florida that emerged totally unscathed right this storm and uh Sarasota county some areas a little bit to the south of there so you know kind of between I would say Sarasota and maybe Naples. Very extensive damage. The Tampa area, it was not hit as hard as it could have been. And I think when people were really worried about this storm earlier in the week, the fear was that there would be a direct or close to direct hit on Tampa, which would have been catastrophic.

And that probably would have put the storm up there with, you know, the worst, costliest natural disasters of all time in this country. We dodged that. but it was still strong enough and there was enough of an impact in enough, large to mid-sized economies that it's a fairly high price tag, certainly relative to Helene and relative to most storms for the last few years. Right. So the obvious economic damage is what we're talking about right now,

the disruption to the economy, the lost output that results, and then, of course, the property damage. That, at least to my mind's eye, is offset to some degree. The ultimate economic fallout is offset to some degree when we're talking about these costs. We're going to get to, there's other costs, obviously, which we'll get to in just a second, including the insurance and migration patterns, all. But in terms of these costs, you get, generally, we've seen the federal government step in and provide support. And again, in my mind's eye, looking at these storms over the years, in recent times, when I say recent, say the last 25 years, the federal government makes, generally makes the economy whole.

What I mean by that is whatever is not insured by the private markets and also the economic loss is covered generally by federal government support. coming in and helping out so that the net cost is basically a wash. Now, again, this is obviously a disaster. It's very disruptive. And initially, it's a big economic problem. But the money starts flowing pretty quickly. Economic activity picks up. In fact, at some points, the economy is growing more faster than otherwise would have.

And at the end of all of that, several years down the road, after the reconstruction, the economy is kind of sort of back to where it would have been without the store. At least that's been the case so far, you know, over the last 25 years. Do I have that roughly right? Yes, but with exceptions, right? So I think that's roughly right, but there are examples where that has not been the case. Katrina is the obvious example, right, where federal aid flowed in. It probably was insufficient, but especially when you look at the scale of the debt,

there and the fact that New Orleans was an economy where that was struggling already, where the private insurance market and the state was not able to kind of step in to the same extent, as we've seen in some other disasters. That led to permanent out migration. And that can happen. I think you're right, though, for the most part, the government and FEMA steps in. Usually kind of partisan squabbling is mostly put aside. And I think we're seeing this in North Carolina. despite some of the narratives out there, that there does seem to be a robust federal response. I would expect the same in Florida.

I do worry, kind of in the long run, there may be reasons to, you know, think of if storms, as we expect are going to continue to get more frequent, more severe. And there may be only, there may be limitations on what the federal government can do. Political, right? I mean, you can almost feel it now, right? because there's some reticence on the part of the Speaker of the House to come back into session

to appropriate more emergency funds for FEMA, the emergency management. It's administration, right, federal emergency management administration. They're the guys that disperse the money and there's some hesitance to do that. And then that may be signaling something going forward that the federal government, because of the budgetary costs, may not actually step up to the degree they have. at least over the last quarter century. Yeah, I think that's right. I mean, we saw squabbling back when Superstorm Sandy hit.

Yeah, exactly. That was more of a red state, blue state thing. But there's nothing that I think eventually is immune from partisan politics. So that certainly could be part of the story in the long road, too. And, you know, these storms, it feels like the number, the damage is like coalescing around 50 billion. You know, it's like, you know, category three, four storm hitting the, you know, the peninsula of Florida or Texas, it's about 50 billion, give or take.

That's what it feels like, you know, something around. And keep in my right, this is when it feels like the narrative, and, you know, I'm knocking on a lot of wood here as I say this, but it seems to be that the narrative is usually the worst case scenario was avoided, right? And we're still getting to this 50 billion north. So that's what scares me is, you know, one of these times we're not going to avoid the worst case scenario. Right, right.

We're in a bad mood before we started this conversation, right? I probably shouldn't get too dark here. But eventually, it could go a lot higher. So another very significant economic impact is what Chris was just talking about, the impact on homeowners insurance. Chris, I know you've done a lot of work in this area already. Do you want to describe what you're learning about the impact on homeowners insurance and what that means for property values and the economy?

Yeah, sure. You wrote a great paper, by the way. So I don't know if it's in the public domain, but they could Google D-R-R-E-D-E-R-I-T-I. And everyone's got to learn how to spell your last name. It's not easy. Small D, don't remember, don't forget, small D-E, capital R-I-T-I. Those are two different words, right? They are.

And he says it, I'm not even going to try to pronounce it. But anyway, you can find that on the web, I believe, right, if you look. Should be able to. Or just contact me. Okay, there you go. Go ahead. Make it easy. So definitely is still a work in progress.

A big issue in terms of evaluating the impact on insurance is just insurance is somewhat fragmented, right? Every state has its own rules, own regulatory bodies. Pulling the data together can be difficult just because every policy is different, right? You have different deductibles and whatnot. So we're making some progress here, but just to say, I think we're still learning. Perhaps the biggest mystery that we've seen over the last few years is just that insurance, we haven't seen insurance premium increases really impact housing markets to a large degree

in terms of either sales or prices. I attribute that to just the low interest rate environment kind of substituting away for some of those higher premiums that, you know, yes, you have to pay more for your insurance, but you're getting, you got a deal on the interest rate, kind of see that. that net, net itself out. I think going forward here, that is starting to change. And certainly in some of those Florida markets, you are seeing home buyers or home owners changing their behavior because of the insurance premium, right? They're seeing more sales, right? People who want to get out and move. And you're also seeing homebuyers being much more sensitive to the

potential for insurance to increase going forward here. So as these hurricanes come through, We know they have big impacts in terms of the insurance availability in some of these areas. And that's, I see as the key risk here. Not only for the properties that are directly impacted by the storm, but in Florida, for example, you have the state-sponsored citizens insurance program. The premiums actually will be redistributed across the entire state if there's a shortfall in that program. So you could see the impacts of this storm not only in the areas that took a direct hit,

but throughout the state, you know, parts of the state that are far away from the hurricane itself. So I think that's certainly something to pay attention to and be mindful of as we think about the effects of the storm insurance. I think you said this, but just to reiterate, I mean, for many, many, we do a lot of house price modeling, right? We produce models to project house prices for lots of different purposes. And for years, you know, you try to get homeowners insurance into the model, not so much. Not so much. But now we're, it's really meaningful, right? I mean, you can actually visually see that.

You could do a so-called scatter plot on horizontal axis. You can look at homeowners insurance across, let's say, states, and on the, on the vertical axis, the y-axis. took a look at house price changes since before the pandemic, and you can visually see the relationship. Yeah, that's right. That's right. You are starting to see that kind of play out here. I guess what we find overall nationally, yeah, the increase in premiums is a big deal, but it doesn't have that much of an impact, right? Even my 30% increase in a premium. Right. It's still in dollar terms of relatively manageable or small amount. So that doesn't really matter. But what we really see the issue, of course, is in these areas that are seeing the highest insurance premium increases, right?

Where it's people paying tens of thousands of dollars a year for their insurance, that's clearly having a real effect. And increasingly, some can't get insurance at all. And that also is not only in the residential, not only in the residential market, but it's in the multifamily market. Property developers are starting to have, and owners are starting to have difficulty getting insurance or getting getting affordable insurance. If you think about all those condos in Miami, right, there's a lot of talking on those. I think

that whole market is going to shift. I don't, I think some of those buildings are not are just not going to be sustainable as condominiums. They're going to have to become, they're going to have to sell out to a developer and turn into apartments or some, some type of other structure because the, the premium increase that would be needed, restore these properties or bring them up to code is just too high. So I think you're going to see some real shifts over the next couple of years as a result of just the risk of these hurricanes and storms, let alone if we and when another one hits. Yeah, I mean, the economic consequences of this are significant.

I mean, it's a significant cost. But it's also perhaps what's needed, right? I mean, if we're going to build right on the ocean in harm's way, I mean, that doesn't make sense, right, for anybody that the cost rate is too high. So this is how you would think it would should work, right? The market's speaking at saying, hey, go ahead. You want to build there, fine. You want to live there, fine. But this is going to be costly because the risks here are very high.

And hopefully the idea is that that will ultimately dissuade development in places that are going to experience, you know, these kind of natural disasters. Would you agree with that? Definitely. I think this is actually the most direct way that the most direct way. All the climate change risk that we're talking about actually gets transmitted into the market and into decisions, right? Because we can run scenarios that go out 50 years and come up with results. but it's very hard to translate that into what that means for me as a household or as a homeowner. But seeing the impact on my insurance, well, now that's immediate, right?

My behavior is going to change because it's not just a theoretical number out there. It's now impacting my pocketbook today. So in terms of how we think about kind of those larger, longer term risks and bring them into more immediate decisions, I think that it's through these insurance markets, right? That's how these things are going to play out. Which gets to the other major potential economic consequences, and that's the impact on migration flows, right? I mean, you may, Adam, turning back to you again, you mentioned that in the context of

Katrina. That was obvious. There was mass outflows from New Orleans to the surrounding areas. Have we observed any kind of migration effects yet as a result of these storms? And do you expect them to occur? Not really. I think most of these storms, well, the first part, I would say not really. The second part, that's a little bit more complicated.

We have seen similarly strong storms. Hurricane Ian a couple of years ago comes to mind, and we saw immediate out migration from the Naples metro area, Lee County, Florida, which is where that had the largest impact. But people generally come back and rebuild. And again, a lot of that just has to do with the fact that even though insurance premiums are high, they are able to either get the coverage that they need. You know, they pay quite a bit for it, but they still have coverage, or the federal government steps in, makes people whole, and they continue to rebuild.

And I think that does create some strange incentives, right? It's back. If the private market is going to be the thing that compels builders and individuals to, move inland, move away from these vulnerable coastal areas, the fact that the federal government is generally there to provide a backstop, that you've got these state programs a place in Florida where there are insurers of last resort that people can rely on. It does lead to rebuilding it. People generally are not in large numbers. I think going forward, I don't expect that this storm is going to be all that different in that respect. I would

would expect that people are going to, they may be displaced for a little while, but we'll see healthy rebuilding, I think, along the Gulf Coast again. I think down the road, the thing that moves the needle is what Chris was talking about that. I think ultimately, if insurance premiums are high enough of housing affordability, and eventually, right, we'll get to a point where the impact on housing affordability is severe enough, that it's going to cause people to think twice about moving to Florida or staying in Florida. I still think we're probably a decade plus away from that moment, but I think that is, that is coming eventually. I wonder, here's here's the thing.

This is the third big storm that's hit that part of Florida. South is kind of the west coast of Florida. You mentioned Ian, that's two years ago. And then you had two this year. And the season's not over, by the way. It's still going here. And these are pretty meaningful storms. And, you know, typically a good forecasting rule of thumb is if you've got two data

points, you can draw a line. If you can draw a line, you can do a forecast. And that's how people do forecasts. A lot of people do forecasts. And now they've got three data points, all making that line look pretty strong. And you're saying, oh, you know, maybe this isn't, you know, these storms aren't a one in 10 year event. Maybe this is an every year event. And if you saw it thought that, if you thought it's an every year event, wouldn't that affect where you decided to move? Maybe, maybe it doesn't mean you don't go to Florida. Maybe what it means is you're not on the, you're on the mainland side of the intercoastal waterway. You're not on the beach side of the intercoaster water. I don't know. I'm just asking.

I just wonder about that. Yeah. I mean, I think that's a fair point. I also think inertia can be pretty powerful. And I mean, we saw this in Houston a while back, right? Hurricane Harvey hit. A couple years before that, it wasn't a hurricane, but you had, I think it was a one, one in 500 year flood event, followed by another one in 500 year flood event. I think it's like two out of three years. And I mean, by that logic, right, you would expect people draw that line and maybe start to move out of an area like that. And haven't really seen it happen yet. I mean, at some point, though, you're right. If it's, you know, year after year after year of major storm hitting, like, yes, I think I think. I'll have to tell you. Like, I have a lot of family in Florida.

I see lots of Florida. And some of these, the damage these storms do, I look at it. It's literally dystopic. You can see pools of condos bracked in half is sitting on the beach. It's like, really, you're going to rebuild that? I mean, you know, and I've seen these beaches for decades, and if I go back decades ago, compared to today, the high tide is up to the seawall. That was never the case. That was never the case, you know, 20, 25 years ago. So I don't know. I'm perplexed by it. I'm perplexed by it. But anyway, okay, anything else you want to call out on this issue? There's a lot of stuff here, and we're writing a lot about it and talking a lot about it. And, of course, we're working with our colleagues and the rest of Moody's that do very detailed

work on calculating the insured losses. And we'll have a lot more to say about that. But anything else before we move on? There's one more thing I want to call out, but I can save it for the stats game because I think I have a stats. What's that? I think I can save it for the stats game because I think I have a statistic that I think will lead to one other point I want to make here. But I'll allow you a segue.

Well, okay, very, very good. So guys, any other things you want to call? Merissa, anything else you want to call out on the storms? No, I don't know. Okay. Let's play the game, the stats game. We put forward a stat statistic. The rest of the group tries to figure that out with clues, deductive reasoning, questions.

The best stat is one that isn't so easy. Although I'm playing this game, I've been hot the last couple, three weeks. I don't know if you've noticed, but like I've making this game feel really easy. I'm just saying. I wasn't here last week. Oh, that's true. She missed it. Wasn't I hot last week, Chris?

You were. You were. Although Dante used the stat that I used the week before, which I think, yeah, it's disqualifying. Damn you, Matt. I heard it. And Mr. Collier. Yeah. Negative today, huh?

What's that? Maybe, yeah. A little negative today. Who Matt is? Matt, yeah. Yeah, I know. He's bringing. I feel good.

I feel good. I don't know. And one that's not so. hard we never get it. And if it's apropos to the topic at hand, which a lot of good topics here, all the better. Marissa, tradition has it goes first. Marissa, you're up. Plus. 54%. In the CPI report? Yep. Ooh, is it a certain monthly percent change in a certain product or a certain good or service? It is a monthly change, yep. Ooh, 0.5. I have four, you're going to second.

That's a big increase. It's not, that's. That's right. It is a big increase. You win. Is it on the good side of the CPI? Is it a good? At what point do you question so much that you just got to take a guess?

No, it's not on the good side. It's on the service side. It's not in the housing. Let's take a guess, guys. So in medical care, medical care, physician's offices? No. Okay. Okay, Chris, you're up.

Pick one. Matt's cogitating over there. I think he's been... It's a broader category than some... Oh, it's a broader category? Yeah. And it's 0.54, right? That's correct, yeah.

0.54. Big increase. Month over month. Month over month. Okay. Food away from home. No. Transportation services.

It's not housing. We know that. A broad category. Broad category. Not medical care. Recreational activities. What was the super core was a little less than that, right? Oh, super.

No, it's super core. Is it okay, okay. Yeah. It is super core. So this is for services. So services. X energy and X Shelter was up 0.54% over the month, which is the largest monthly increase we've seen in Supercore since March.

Why do you call that Supercore? Because I think it kind of goes to the theme of this, where it was like the inflation was coming from all these other things, not shelter for, you know, for once, right? Right. Shelter actually moderated, but all the other components of service. inflation were up pretty strongly. So SuperCore is up 4.6% year over year. So still pretty elevated. I mean, that's down significantly from where it had been earlier in the year and last year. But it did take up month over month and year over year. And of course, SuperCore is the measure that Powell called out back when

he was to when he was keeping rates very high because he said look this as long as this is high it's going to be very difficult for us to ease monetary policy he's not talked about it recently but that's that's where it came from right and i think it goes to that sticky versus moderation debate you right because the things that are in some of these services are shelter is obviously sticky. But some of these other services, like we're just talking about, insurance, motor vehicle, insurance, motor vehicle maintenance, repair, those kinds of things tend to be sticky because they follow kind of the prices of other goods and or services, and it may take time for them to adjust. So this is where, you know, when you ask me, am I in the moderation of the sticky camp?

Overall, I'm in the moderation camp, but you do see stickiness when you look, particularly in services for something. Yeah, no, that's a good one. Yeah, because when you said I'm in the moderation camp, you hesitated. And that's the hesitation. Yeah, yeah, yeah, good one. You can certainly find things that are sticky. Yeah, right.

Okay, Adam, you're up. All right. It's got to do with natural disasters. It has to do natural disasters. Now, this is, it's very obscure, so I'm going to give you some hints here. No, no, hints. Just give us the number. Well, you'll never get that.

If I'd say the number, I mean, I'm pulling. Oh, I don't know. I don't know. I don't know. I'm, I feel, feeling, feeling pretty good. Give us the number and then. Oh, you're all right. This is brash. Okay. Negative 157,300. Okay. Give us the clues. Okay. That's a per capita per household. Yeah, it is, it is a number of jobs, and it's from September 2017. So what's the question? We're supposed to tell you.

What is it? What, what, it's not, it's not just. Is this, what is it? Harvey's effect on employment. You're, you've got the right idea. Wilma? Not that, but. Is it, is, you're asking us what, what natural disaster resulted in that loss of, in that?

There has been that, there, there was a job, a loss of jobs. I'm talking about specific geography in September 2017. Oh, Texas? No. California? Because there was one of the Myers, California. No? Do you want us to guess the geography?

Yeah. Oh, Puerto Rico. No. I'm just glad this isn't Mets related, but go ahead. Oh, that's a Mets man. Is he a Mets man? Oh, that's coming now. I was debating how much taunting did you hear of you guys.

You know, yesterday I wore my Mets shirt for a nice large audience. I don't want to know how that happened, but go ahead. He's from Long Island. Oh, that's how it happened. People don't just become Mets fans. They haven't had much success for the last 40 years. Yeah, that's not what you choose if you had a choice. Well, I have to say with the Phillies that I'm rooting for Mets, Yankees.

That would be kind of fun. That would be fun. Yeah, that would be really fun. Has that ever happened, Mets Yankees? Yes. Once, okay. It didn't go well. Oh.

Things don't tend to end well for the Mets. Yeah, yeah. Yeah. Okay. So what's the deal? Anyway, okay. This is the number of jobs lost in Florida in September of 2017. The reason I'm mentioning it is, right, that was when Hurricane Irma hit. Hurricane Irma struck during the payroll reference week in Florida. And most of the big storms of the last few years have not hit during the reference week. Milton did.

So I think we can see a very significant impact on the top line payroll number for October, which given, right, that this is days before the election, I mean, I think this is this really has a, the potential to influence the narrative. What date does the employment report come out? I believe you can double checks, but I believe it's the first. November first. November the first. Oh, goodness.

Yeah, you're right. That's going to happen. There's going to be a lot of handwringing. And so this is actually, I think, a potential risk for the Harris campaign. That is an interesting point. Yeah, almost certainly going to happen, right? Because when you say what happens is that for the employment report, the BLS does its survey of businesses and households in the week that includes the 12th of the month. And so that's this week, right?

Yeah, 12th is tomorrow. So I wasn't terrible to turn on how we deal with Saturdays, but I think that's this week. I think it's this week. Yeah. They count a week starting Sunday. Oh, man. You know you're right. It's going to have an impact.

Now, let's see. They work any, although if you're working even an hour in that week, you're counted as employed. It'll affect hours worked for sure. For sure. That'll get a big hit. But maybe it won't, in fact, the employment number. Maybe. But again, this is where I think that's hit.

What day did this hit? This hit on Wednesday night. Wednesday night. That would be the ninth. Mercy. If it starts Sunday, does that mean that so this, tomorrow is the end of the reference week? Yeah. That's right.

Tomorrow's the last day. So if anybody worked earlier in the week and hadn't evacuated it, then it would like, because if they worked one hours, Mark said. That's right. That's right. Okay, okay. It's possible. But I will say, right, that closures and evacuations were already happening at the beginning

Yeah. That's a good point. Schools were closed across the state, I think, from Tuesday afternoon through Thursday. And in the Tampa area, kind of down through the Gulf Coast, people were evacuating very early. I think a lot of stores were closed. I think this is going to have a really significant impact on the payroll number. That's very important. That number was a little tortured, but I really wanted to get to this point.

No, no, no. That's a great point. Yeah, I mean, airports closed on Wednesday. Disney World closed. Yep. I actually look What day did that close? Do you know?

I think it was Wednesday. It closed early. Yeah. Actually, no refunds. No refunds. Are you making that up? No.

Really? You're not making that up? No refunds. That's, wow. The fact of God. Well, according to a neighbor.

Oh, okay. Okay. I actually was looking at this. This was a backup startup mine here. Disney World. has now been closed seven times or seven days over the last two years because of hurricanes. Wow.

The prior, I think 17 or 18 years, I think there were four days that it had closed. So just another measure of how frequent and severe these hurricanes are. Right. Okay, I want to go next. All right. In 160 billion dollars. And Adam, you should know this. Hurricane related.

Hurricane related. Katrina's price tag? Yeah, Katrina's price tag. In today's dollars, in today's dollars. So that gives you context. So if Helene is, say, around 50, Milton, a little north of that, we don't know, but Prudential and north of that, this is Katrina was three, you know, according to those estimates, three, give you a sense of magnitude, three times is large, more than three times as large. Yeah. Yeah, I thought that was a pretty good stat. Yeah. Okay. You want to do one more? Matt, you want to go? Sure. 11.53%. CPI? No. Is it inflation related?

No. Is it a stat that came out this week? Is it related to natural disasters? No. And yes, it did come out this week. It's not the increase in initial claims, is it? No. No.

That jump because of the Helene, right? Aline, yeah. Yeah. In North Carolina in particular. Think positively. You guys are too negative. Think positively. 11.5.

It is, Chris. That's right. Yeah, that's a debt service ratio from the Federal Reserve, which is quarterly, so it's from Q2. And I likely everybody here encounters the same, like, you know,

how is the US economy doing so well? Something's got to break. There's a kind of sense that I get talking to people, I assume, that everyone else is familiar with. And one of the things I always point to where I think about is,

how well households have managed debt. 11.53 is the same as the first quarter. It's a little higher than it was a year ago, but it's still lower than history. And what this measures is kind of minimum payments do. So all the bills that households have to pay as a share of disposable income. So it's still low, rising a little bit, but low historically. And that's given, just kind of maintain breathing room in household budgets and allowed then to keep spending and it's the key reason I think that the US economy is doing really well and the

consumer's doing really well. Hey, Chris, didn't the Fed make some methodological change here with this release? Or Matt, do you know about that? I was just going to say it. Yeah. And I guess that's a, it now includes homeowners insurance and property taxes as like an escrow payment. So I don't know.

It's an aggregation, but before it didn't. Is that your understanding of the methodological change, Chris? Well, the big change, yes, but the big change is that the Fed is now using consumer credit reports to calculate the debt service before was more of an estimation based on a variety of assumptions. So this is more directly observed data. But yeah, I guess a methodological change is that because it is using the actual payments observed on the credit report for mortgage borrowers who do escrow, it's going to include their

property tax and insurance payments. If that finally cut up to us, right? Because that's the way we were doing it. Yeah. Our credit card. Yeah. But if you look at the current estimate, 11.5 is like exactly back to where it was pre-pendemic. It's kind of like the average, close to the average historically, right? Something maybe a little lower than average historically.

From 2020, 2019, it's a little lower. historically is a little bit lower than that, but even there, it's lower today than historically average using that measure. Right. And I guess what's going on is lower income households who've taken on credit card, consumer finance debt. Their debt service is probably up, right? But that's getting, their numbers are small relative to the debt payments made by

middle and high income households. And those payments are stable as a pancake probably because they all locked in the mortgage. Yeah, it's the mortgage debt that, you know, is really the driver here in terms of the dollar volume. So, yeah, payments being low and stable, as you put it, you know, that really anchors that, that service ratio. Yeah, I'm making this up, but it's roughly right. There's like, what, $16 trillion in total household debt outstanding. 12 is mortgage. One maybe is credit cards.

One and a half is auto. One and a half a student loan, roughly speaking. Yeah. Home equity loans are only $500 billion, you know, something like that. Very, very modest. Yeah. So it's all about the mortgage debt and everyone, well, most people locked in a 30-year or 15-year fixed-rate mortgage when rates were very low. So they're insulated.

And that's one reason why, to your point, Matt, the consumer has continued to hang tough and drive the train. And one of the big differences with the rest of the world, because households and the rest of the world have debt that had more closely tied to market rates and they got hit by the run-up and rates globally. Right. Okay. Okay. Okay. Okay, good.

Well, Chris, do you want to go or what do you think? We can move on to the... Well, I think we're kind of running out of time. Yeah. We're already an hour 10, I think, you know, something like that. That's kind of our... Somehow we always end up at 110. Do you have a good stat or how good is it?

I can save it. I can save it. Save it. Okay, he's going to save it. Okay. I think we'll then call this a podcast. Any other, again, please send your questions. We will, I promise, we will get to them because we love those questions and we'll carve out

time for the next couple podcasts to do that. But anything else, guys, where we call it a podcast? Go Tigers. Oh, really? Okay. Game on. Game on. All right. Tigers Mets World Series. You and I, Chris. All right. Play some bets. Looking at you. That's right. You're from Michigan.

I grew up in Michigan, yeah. Yeah, very good. I'm kind of rooting for the Tigers, right? Because, well, I could root for the Mets too, believe it or not, because it's the underdog, right? We got two. Yeah, the Mets are not won anything since 1986. Yeah. I mean, you know, I'll spare you my rant about the Long Island sports van and our hardships of the last. One day, I'll be another podcast.

All right. No, no, I don't think so. Not this podcast. That's inside of it. I'm too saying. I'm not, we're not going there. Yeah. All right.

Adam Hurricane Kamens. Thanks for coming on. Mr. Collier. Thanks for coming on. Good to see you guys. Marissa and Chris, and I hope everyone has a good weekend. And dear listener, we'll catch you next week. Take care now.