Moody's Talks - Inside Economics - Negative Sentiment and New Statistics Champion

Episode Date: June 24, 2022

Julia Coronado, President and Founder, MacroPolicy Perspectives, joins the podcast to discuss whether we can talk ourselves into a recession, the mixed messages on consumer sentiment and what the odds a downturn are. She also crushes the statistics game. Full Episode TranscriptFor more from Julia Coronado, follow her @jc_econFollow Mark Zandi @MarkZandi, Ryan Sweet @RealTime_Econ and Cris deRitis on LinkedIn for additional insight. 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 Sandy, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-hosts, Ryan. Ryan, Ryan Sweet, Director of Real Time Economics. Ryan, good to be, I said, good to see you, I should say. Good to see you, Mark. Yeah, it's been busy. I was in D.C. yesterday at a housing conference. We could talk about that a little bit.

That was pretty interesting. You busy? Do you drive or take the train? I'm back on the Acela. Yeah, the train. Yeah, very convenient. Not like these, I heard you had a nightmare with your trip out to Phoenix. Yeah, so I went to Philly International Airport for the first time in two years,

and all the flights to Phoenix got canceled. I was right back on the car coming home. And that's a hub for American, right? It is. That's up to hub. So they sent us all to the American Airlines, you know, concierge to try to rebook our flights, and they had a sign that were understaffed. So they weren't there.

Oh, goodness. It was a good experience. The concierge desk wasn't there. No, we had to go to a different terminal and then it was just a nightmare. And you heard the interloper's voice. That's Julia Coronado, which I am going to officially introduce in a second. Before I do that, though, let me just bring Chris in. I like to think of myself as an interloper.

You know, I say that in a nice way. It's a good. Interlopers are good. We need those. Yeah, definitely. And Dr. DeRides is speaking to us from a spa in northern Italy. Or my cabin in northern Italy. Really?

Yes. Near the Austrian border. Let me ask you a question, Julia. Yes. You see Chris, we're on Zoom here. You see Chris, he's on vacation, but he's in this white shirt. I mean, who's in a white shirt on their vacation, right? Yeah.

Well, I knew there would be the podcast. I knew there'd be a podcast. You know, I wanted to look the part. Oh, is that? that what really is that i didn't know where to dress code so are you wearing like bermuda shorts on the bottom is that what you're saying well no no you can see i'm in a tie and a shirt because i've got something i have to do right after this but i am in my sweatpants just so you know you can see my grandma in the back there so anyway it's good to have everybody i was a little concerned we wouldn't

have Chris on on this podcast but uh you're here you made it thank you made it dedication wouldn't miss it wouldn't miss it i appreciate that and julia julia coronado it's good to have you it's so good to be here yeah we've kind of crossed paths uh over the years and uh it's just you do such great work and love to have very happy to have you on talk about uh the macro economic environment here in the u.s but before we kind of dive into business cycle stuff uh Can you give us a sense of your history? How did you get to where you are today? And you have a new company or I don't know how new it is. It's not that new anymore.

Yeah. So macro policy perspectives is a macro forecasting firm that I launched with my business partner, Laura Rosner, more than five years ago, about five and a half years ago. I did not know that. Okay, great. We've been doing this a little while. We're growing. We just hired a new economist. So yeah, things are good. People want to have macro people to turn to and ask questions. And, you know, it's an incredibly uncertain environment. It's not easy forecasting, but it's also, as you know, for clients, it's just about thinking through risks and possible scenarios in addition to actual point forecast. So yeah, so that's what that's what we do. And it's and it's been going really great.

That's great to hear. Yeah, we're all about scenarios at Moody's Analytics. Yes. All about scenarios. So I noticed you have a really cool group of senior advisors. Ellen Hughes Cromwick, good friend. She was the chief economist of Ford, wasn't she? Yeah, she was chief economist with Ford.

She was also chief economist at the Commerce Department for a while. That I didn't know. Yeah. Yeah. And she's now deep into climate change issues. She is deep into climate change issues and specifically electric vehicles as well, very, very, um, leaning into that kind of that transition. And Dick burner, I haven't been, I was just saying, I haven't said his name in quite some time.

He was head of the Office of Financial Research. Yep. O'HR. Yep. The Treasury and he was chief economist at Morgan Stanley for many years. Right. And PNC, I believe, way back when, I think. Yes, yes, I think that's right.

I think because PNC's, we're from Philly and PNC, you know, is my bank. And I think I think that's how I got to know, Dick. But he's writing for you as well. Yeah, yeah, yeah. He writes for us. He's really focused on some of the monetary policy implementation and plumbing issues. So that's a useful perspective. We believe plumbing matters and getting details right is important.

So Dick helps with all of his experience and markets. He brings a really valuable perspective. So you had a pretty cool path getting to macro policy perspectives. You just want to describe that for a little bit just to give the listener. Yeah, yeah. So I got my PhD at UT Austin and where I now sort of teach part-time because I love it and move back to Austin. But in between, I got hired by the Federal Reserve Board. So I went from grad school to the Federal Reserve Board.

I was a staff economist there for about eight years. I worked both in the consumption forecasting, so in the GDP forecasting group for a while. But most of my time I spent in the financial side of the research division, in the flow of funds group, looking at household balance sheets and pension finances, and home equity extraction and all kinds of financial issues and sort of that interaction between the financial side

of the economy and the real side of the economy, which was a really interesting place to be before and through the great recession and the housing boom and bust. So it really was a good perspective to have. Yeah, and so we cross paths not long ago, So you're trying to get a debate together with Arthur Laffer. Folks remember Arthur Laffer.

And that was pretty funny. Well, sort of funny. It was sort of funny. Yeah. He had a very, you were thinking of me to debate him, I believe. He was very particular about who he wanted to. Oh, yeah. Yeah.

Eventually, I wasn't even part of the event. So. Oh, is that right? Yeah. The event happened. It did happen. Oh, it happened. Yes, it did. It happened. He ended up debating. This was a UT initiative. It was not something I was organizing. I was just involved with through the UT engagement. And they wanted a debate on taxes. And as you remember, he wanted it to be very, very narrow. And eventually he debated Jamie Galbraith, who's also. Well, actually, I recommended that. I thought that was because he's at UT, isn't he?

Yeah. Yeah, he is at UT. Yes. So that it did. eventually happened. But, but, uh, but, uh, I was not, uh, an acceptable moderator. So eventually the Oh, you got kicked off too. Oh, I didn't, oh, I didn't realize. Oh, okay. Well, yeah. Yeah. Well, I, I, I had been in a debate with, with, uh, Arthur. I can't even remember. I, there were a couple other people. And we, we, it was a, it was, in this debate, it's, uh, uh, intelligent squared. Somebody wins. Oh. And we won. I won. Oh, no. Oh, no. Oh, no. really made him upset. And so I'm sure he was very cautious about that.

So hence his reluctance to have you as the sparring partner. Yeah, I think so. Anyway, that was pretty funny. So anyway, let's dive into the macro situation here because there's a lot to talk about. And one thing I'm hearing more and more often from folks, or at least I'm getting the question, are we already in a recession? And, you know, it's just everyone is so pessimistic. Yeah. Every CEO I talked to, CFO, you saw today's University of Michigan survey.

We can talk about that. You know, and, you know, GDP did fall in the first quarter. And it's tracking now based on the data barely positive. And it could come in negative again. So you could conceivably get two quarters of negative growth. So question to the group. And you first, Julia, are, Is there any scenario where we actually are already in recession?

I would say almost no scenario in which we are already in a recession. And mainly because the job market is so rip snorting strong, the three-month average gain and payrolls is still above 400,000, which is, you know, pre-COVID, that would be unimaginable. And now that's a moderation from where we've been. So the GDP numbers, as you know, always subject to revision and have a very particular composition with that drag, that decline being driven by inventories and imports. And that just highlights that the disruptive force of supply chains and, you know, lack of inventory and inventory restocking and these sort of very wild nonlinear dynamics that are flowing into the GDP numbers looking at consistent. looking at investment, looking at hiring. The economy is still very strong. It has, it's moderating, but it's still just got an extremely solid base of that all-important hiring,

spending dynamic. So I would say there's almost no way that we are already in a recession. We would have to see very rapid deterioration in the labor market, in my view, in the next few months for us to even enter one by year end. So you're sitting on the business cycle dating committee of the National Bureau of Economic Research, the group of academics that, and you're an academic, group of academics that, you know, arbitrate whether we're in recession or not. You see two quarters of, say we get a negative quarter of GDP. So we have two consecutive quarters.

You still say, no, that's not a recession. No, no. I mean, that rule of thumb is actually pretty reliable. You know, if you look historically, when you have two quarters of negative GDP growth, it has pretty much always lined up with an NBER defined recession. So it's not a bad rule of thumb. But again, you know, these GDP numbers, especially the areas that are causing these big swings, are measured very imperfectly in real time.

So they, you know, again, they don't line up with the demand picture that we're seeing or, you know, another important input traditionally for the NBER has been industrial production. That's motoring along just fine too. There's like no metric on the real demand side that looks particularly weak, let alone contracting. So, yeah, I don't even think it would be much of a debate for the committee. They may not even convene to discuss it. Yeah, probably not even convening yet. you know, this is, these are wild numbers that could be massively revised and don't align with

the all important real economy. Yeah, I think we're all with you on that. Yeah. This is just, yeah, right, Chris? I mean, yeah, for sure. Yeah. I mean, when we're creating 400,000 jobs, which is what we did in the month of May, we'll have to see what June looks like. Yeah. I mean, in June should moderate. And again, those numbers could also be revised over time, but they're not revised as much as GDP. And there's a lot of independent labor market indicators that are saying the same thing, which is that the job market,

even though it's moderating, is still just really strong. Right. You can have a recession with initial jobless claims. Yeah. South of 250. I mean, it's really low to the point. They're low.

But they're low. Yep. So that statistic for the listener is initial claims for unemployment insurance. weekly data, so very close to real time. And that is a measure of layoffs. So if you're in recession, you've got to see layoffs rising. And actually it fell last week, didn't it? The UI claims, initial claims? I think they fell a little bit. Yeah, they were, yeah, they were sort of, they're still, you know, again, they've come up off the lows, but they're still really low.

Right. Right. Right. Right. I mean, what's our rule of thumb here? Two hundred fifty thousand per week would be consistent with a well-functioning economy, and we're at like 2.30, right? 2.30, yeah. Yeah, something like that. So, okay, so we're all in agreement, no recession here. Even if we get a Q2 number, that GDP number that's in, has a negative sign. Squirly. Yeah.

Okay. Yeah, because consumer spending is tracking really well still. I mean, there's been some moderation, but, you know, consumers have been holding up despite this shock to their purchasing power from the war. Yeah. And I think the way I've talked about this is that I view the American consumer as the firewall between continued economic growth, albeit much slower economic growth, because that's what we need here so inflation comes in. But that in recession. Right. Yeah. Absolutely. And that firewall feels, I don't want to put words in your mouth, but it feels pretty strong, right? It is strong. I mean,

we're in a weird moment where consumers, you know, different measures of sentiment. So the Michigan measure came out today and it's pretty depressed, like extremely depressed. The conference board measure of sentiment is, you know, it's come down off the highs, but it looks just fine. So we've got these wildly different signals on how consumers feel. And that can or cannot be a leading indicator of what they actually do. So far, the depressed Michigan measure has. not correlated with actual spending at all. You know, we've seen very resilient consumption. So, but you know, it's not like it's all, everything's coming up roses.

Consumers are facing, they don't like inflation. And it's challenging their purchasing power. And it's eaten into some of the gains that they enjoyed last year in terms of cash on hand and, you know, strong wage gains. So it doesn't feel. feel great, but yet, you know, they're getting up every morning, going to work, changing jobs, you know, spending their money. So, so far, so good. That engine is motoring along. Yeah, you mentioned the University of Michigan survey. So, Ryan, let me turn to you quickly,

because that came out, this is Friday morning, June 24th. The University of Michigan survey came, consumer sentiment survey came out today. You want to just give us a thumbnail sketch of what that said, because it was pretty, pretty dark. If you take it. it by itself. It dropped a lot between May and June, and it's at a record low. So the previous record low was in record. Record low, record meaning in all, this thing's been done since the 60s, I believe, right, the survey? Yeah, I believe so. Yeah. So the lowest ever is what you're saying. The lowest ever. But the University of Michigan survey, based on the questions, it's very sensitive to personal finances. So it's getting hit double by higher gasoline prices and the drop in the stock

market. So it's really not too surprising that the University of Michigan survey is just tanked. Where the conference board survey, based on those questions, are very sensitive to labor market conditions and the job market is doing really well. So that's why we have this divergence in sentiment. But to Julia's point, the relationship between consumer spending and sentiment in the short run is very, very loose. So consumers can say that they're depressed, but they're still going out in spending. Right, right. The one thing that I keep a close eye on is Google searches. So I look at Google trends data. And if you look at search intensity for recession or what is a recession, it's spiking.

So recession is on people's minds. And I think it's just people see the stock market and they assume the stock market is the economy. And then relentless stories about recessions as well. Yeah. So we're going to test the proposition. Can we actually talk ourselves into a recession? Yeah. And I wanted to talk about that.

Maybe this is a good time to do it. you know, here's the odd thing to me. I mean, if folks are watching on YouTube, you can see my hairline. I've seen a lot of recessions. In every recession I've been in, no one has actually predicted the recession. You know, some people, you know, I go back before the Great Recession. I was warning things are off the, you know, going off the rails here. It feels really bad.

But my actual forecast did not have a recession in it, you know, until I think we were actually in recession. You know, we had been in for a while. And that's the case for every recession. And certainly CEOs and CFOs and the average public, they're not thinking recession. They're not thinking that way. This is going to be the first recession, I think, ever, where everyone's predicted it before it's actually happened. Like, yeah, way before.

So I'm of two minds with that kind of frame. One is, well, that means we're going into recession because it's just going to become self-fulfilling. And then the other frame is, well, if we're all thinking that way, probably isn't going to happen. You know, so how do you think about it? I mean, can we actually drive ourselves into a recession? I mean, for me, it's going to, yeah, it would have to be followed through either on the business side with reluctance to hire or engage in investment or, you know, a reluctance by consumers

to spend. And so that's a possible channel you could imagine that, you know, know, every recession is usually not just one shock, but a series of shock. So we've got this high gas prices. We've got tightening monetary policy delivering a correction in market valuations. You know, we've got, you know, and then that makes consumers feel less optimistic and businesses worry more about the future. And then if that then follows through into a spending strike or a hiring strike or, you know, an investment strike, then you could, then you could, then you you could see that positive, you know, there's always an expansions are positive feedback loops,

recessions are negative feedback loops, right? So we're in a positive feedback loop. We've got hiring, consumers have income as long as those paychecks are arriving and they've got options and they feel good about that. So as long as that's, you know, they've got that underpinning of jobs and income, you know, they could slow their spending. They could shift their spending, but to actually see declines in spending and hiring requires a much different dynamic than what we've seen. So, I mean, it's possible, but I can't. And if we go into a recession, it's not like it will be caused by sentiment per se, but those initial shocks that caused the declining sentiment, I would say, you know, and sentiment would be sort of a chaser, you know, and add on to that dynamic.

Yeah, maybe the way I would rephrase what you said, just roll it back to you to see if I got it right. It feels right. You're saying, look, sentiment is so weak, so low. People are so anxious that it won't take much of anything else going wrong here to send them over the edge and for them to pull back and we go into recession. So it's not that we talk ourselves into recession. It's that we're just so depressed, so nervous that, you know, we're skittish.

And so if anyone says, boo, we're going to. run for the bunker and we go in. Well, and there's real things that are making people. Yeah, sure. High gas prices, high food prices. You know, high rents. These are all things that make people feel stretched and anxious. Even I would add the shortages.

That's an unusual dynamic that we aren't used to. There's a question how much that's depressing sentiment that, you know, we went from a world of efficient, cheap supply chains where I can order anything I want and have it, you know, within 48 hours, you know, increasingly. You can get same-day delivery on Amazon of some things now. So we've got moved towards this world of almost instant gratification. And now we're experiencing, you know, you have to wait months sometimes to get something or, you know, or you can't get the thing you want. Or you have something like a formula shortage. I mean, that's,

terrifying for parents. So these are, these are, you know, we're used to being an efficient economy and we're now not as efficient because of some of the supply chain disruptions. And that, that also makes people anxious and feel bad. And so these are real catalysts that could cause a pullback in spending, you know, the anxiety isn't just coming out of thin air. Yeah, good point. I mean, the fact that Ryan couldn't get to Phoenix. I mean, that, you know. Right, exactly. That's like bizarre, right?

Yeah. So everybody's like, oh, yay, let's go out and travel and take some summer vacations and go to weddings. Oops. You know, it turns into a travel nightmare. And, you know, travel nightmares aren't anything new. For those of us who travel around, they've always been part of life. But more prominent, more common certainly doesn't make you feel great about getting on a plane and going on a trip. Yeah.

Hey, Chris, let me quickly turn to you. I mean, do you think we could talk ourselves into recession? Yeah. I agree with Julia. I think, well, two things. One is just the disconnect between words and actions, right? Right now, people are saying they're not feeling great, but they are continuing to spend, right? So I don't, you know, psychological, yeah, absolutely.

They don't feel great seeing these prices, but their actions so far haven't reflected that. And then I do think it's more of an accelerant, right? You need to have something else that push. you and towards the recession and then the negative mood certainly just starts to feed on itself and starts up that negative feedback loop. Yeah, I've never seen anything like that. I think that's the case. You know, like we, in my, in our work, we talk to a lot of senior managers of all kinds

of companies and, you know, obviously the question I ask is how is business and the answer is good. I'm scared to death, you know, right. I'm going to pull back. I'm going to go, really? Okay. Anyway, hey, I think this is a good place for the statistics game before we dive into any more statistics. And just a quick summary for Julia's edification, the statistics game, we each tell a statistic.

The rest of us try to guess it through questioning and clues and deductive reasoning. The best question is one, or best statistic is one that is not too easy that we all get it so fast. Although, you know, Ryan is really good at this and he gets. Yeah. I have heard him be good at this game. Yeah, he's good. And if you're really good, by the way, Julie, you get a cowbell, you know. Oh, man.

Yeah, really. Oh, you should have told me that. Yeah. I'm a big cowbell fan. Cowbell and a bottle of wine. So, you know, be on your game here. Okay. We don't want one too hard that no one can get it.

But in one that's kind of relevant to what's been going on. But that's kind of open-ended. But let me begin with, because Ryan's so good at this, begin with you, Ryan. Why don't you give us your statistic? I see, he's been practicing too. By the way, this is a hard week because there isn't a whole lot of statistics that came out this week. It's kind of makes it easier, though. Oh, does it?

Okay. It does. You're up, Ryan. Oh, I didn't know. I was getting the cowbell. Oh, you were getting the cowbell. Oh, no, no. I called on you first.

Yeah. Oh, okay. Because I want Julie to see how this is done. All right. You're so good at this. All right, I'll give you guys an easy one. All right. Let me just double check to me sure I got you off guard.

5.3%. You didn't. Oh, I know what that is. 5.3% and 3.1%. I know what that is. Go for it. Fire away. That's inflation expectations.

That's UMish inflation expectations. So one is the one year, one year forward. The other is the three to five, no, five. Five to ten year. Five to ten year. And the, the beauty of that one is that whole three point three that drove the Fed to panic and do a 75 basis point rate hike has been revised away. I know. I was going to point that out.

Oh, by the way, hold it before we go into that anymore, this is definitely a cowbell. And I got my own cowbell from Vijay. Oh, wow. It's a good one. It's a good one, right? It's a good cowbell. Professional. Professional cowbell.

Well, I guess, Chris, did you bring your cowbell to Italy? That would show. I did not, but I've been doing a deep research into cowbells. They've got a whole different style of cowbell. Yeah, very sweet sounding here. Oh, yeah. Oh, there are like sheep and cows all over the place here. Oh, you got a Swiss cowbell and northern Italian cowbell.

Yeah, I think it's every other hill. Every village has its own style. It's pretty cool. Like you got your own olives, you got your own wine, you got your own cheese, now you got your own cowbell. You know, you got to differentiate. Well, okay, well, let's go back to that. You miss inflation expectations. And I'm so perplexed by what seemingly the Fed is doing by putting more weight on consumer expectations

and obviously deweighting other expectations from not so much economists because I don't know that that's great, but certainly bond market expectations. I mean, I, I, I feel like that's where the weight should be placed because that's money, people putting their money where their mouth is. So in the, in the, in the, in the, the consumer expectations are very tied to the cost of a gallon of gasoline. If it goes up, sentiment's down. If it got, cost of a gallon of gasoline goes down, sentiment goes up. So what's the deal? What do you think's going on there, Julia? Well, you could look at it as sort of an opportunistic framing of the data that kind of allows them to do what they wanted to do anyway, which was move very quickly expeditiously to a neutral rate. They've kind of already made that conclusion. It was when I was interviewing Tom Barkin this week for a NABE webinar, he said, you know, we want to get there as fast as we can without breaking things. So that's kind of

the FOMC sentiment. And so an upside surprise on both the CPI. It wasn't just Michigan, but it was the combination of an upside surprise on core and headline inflation in the May CPI. Plus, this measure of inflation expectations was a catalyst because the bond market moved. And that's the other thing, Barking sort of was very usefully, usefully clear in outlining that not everybody states it as clearly, which is the bond market moved. It gave them the opportunity to take that, right? So the bond market started pricing in a bigger move and they just went with the market and took that opportunity to get rates closer to neutral. So, you know, I think Michigan, that makes sense. You know, putting too much weight on Michigan seems like over a longer

horizon doesn't seem like a great idea. But it may have just been sort of a good thing. We need something to hang our hat. That makes total sense to me. Hey, Chris, you want to give us your statistic? Sure. It's a two-fer, 51.2 and 51.9. Yes. You know that too, Julia?

I think so. Oh, my God. She's a maven at this thing. Well, so 51.2, I believe, is the U.S. preliminary Pete Glover. global PMI composite. Yes. Right. Oh my. Oh my gosh. This is unbelievable. This is unbelievable. 51.9 is the Eurozone. Am I right? Yes. Oh my gosh.

Hold it. Wait, wait. Wow. Julia, if I had come up with that, Ryan would be accusing me of collusion. She's actually good. No, she's actually really good. Double cowbell. Yeah. Double cowbell for sure. That is incredible. That's really done.

all so I sleep. You're going to displace Ryan as the king of this game. No, but you guys are taking the ones I was going to take, so I need to find. That is funny. I think I have a good one. I think I have a good one. All right. Are you ready for me? Well, let me ask on the PMIs. Chris, why did you bring those up?

I mean, there's a reason for why you pick those. Why did I pick Europe in U.S.? It's because I was just in U.S. now in Europe. Okay. That's easy part. But the, so PMI over 50 still indicates expansion, right? If the PMI's fall below 50, typically that that's a sign of contraction. So it's still in the positive zone, kind of ties in with our previous discussion here.

But they have been falling both in Europe and in the U.S. So it's getting closer and closer to that 50 threshold. So certainly something to keep an eye on. But we're not quite there. And they both came in below expectations, right? Correct. Both of those numbers were pretty noticeable. weaker than what what was the consensus expectation so yeah chris is actually in a spa in northern

italy so that's why he's coming in and out a little bit just just so you know so but even if we break below 50 that's not the recession threshold so i i pay very close attention to the ism survey and that's got to get down to 45 46 or 47 to be consistently to be iS manufacturing survey manufacturing or services manufacturing manufacturing okay And ISM is kind of like a purchasing manager's report, right, for here in the U.S., the ISM survey. Okay. Yeah, so if it dips below 50, it doesn't mean it's over. Well, and actually it goes back to an earlier point.

These numbers have to come down, right? Because we need the economy's growth rate to slow so that we don't blow past full employment and inflation becomes more of an issue. So the fact that these numbers are coming in is not a good thing, right? It's not a bad thing. Right. They're not collapsing either. Yeah, they're not collapsing either.

yeah okay all right julia you're up okay this is this is this pressure's on the pressure is on okay um i'm gonna say a hundred and twenty six thousand is my hundred and twenty six thousand hmm is it uh an economic statistic that came out recently this week this morning this morning so new home sales something a new home sales it must be in the new home sales number but it's on seasonally adjusted. It's not new home sales. Oh, it's not. Okay. It's not a U.S. number. Oh, I mean, hey, look, Chris went. No, no, no. Yeah. It's fair game. Can you give us what continent we're looking at? It's close to home. Canada. Okay. It's in Canada. It's a Canadian number. Canadian. Canada is always like 10% of the U.S. So no, no. Yeah, something like 10, 15% of the U.S.

It can't be Canadian home sales, can it be? No, it's Canadian employment. It's got to be. Canadian employment. Oh, I thought the Canadians released their jobs data when we released ours here in the Not always. Oh, not always. Oh, I didn't know that.

Okay. So Canadian employment rose 126K in the month of May? This is a, yes, it is a, let's see, I'm looking at the screen. It's for April. This is April. Oh, okay. So there must be a different Canadian. employment survey.

Yeah. It must be kind of like their household survey. Yeah. The one that came out this morning has average hourly earnings in it. So that was up. Yeah. So it's a very strong number. As you say, given the scale of Canada, 126,000 certainly is very strong.

Is that a pretty good rule of thumb? I take every U.S. statistic and I divide by 10 and that's Canada. Is that kind of roughly right? I think so. Yeah. Ryan's laughing. Why are you laughing at that, Ryan? You just lost every Canadian list of it.

Yeah. We're going to go out of it now. Seriously? Like this, I mean, it's just there's worth 350 million. They're 35 million. I'm making that up. I think it's 35 million, something like that. I know we're 350 million.

Anyway. I was debating between that one and Canadian CPI, which was also a big. I thought you were debating that one or the number of anchovies in the Atlantic Ocean or something. No, you know, that I could try that. I don't know that number of them. That's right. All right. I got one.

it might be a little on the hard side. So I'm going to preface it by saying existing home sales, because the housing market is obviously on the leading edge of the slowdown. It's getting crushed by these higher rates. Yes. And existing home sales, which came out earlier in the week, they were down a year to date through May, down 6% from a year ago. So take the five months through May in 2022 compared to

2021, we're down 6%. So with that as a preface, and that's a pretty big preface, the two numbers are down 16% and up 5%. Down 16 and up 5. Yeah, go ahead.

Are we staying with existing home sales? Or is that just housing? A new home sale. That's a pretty obvious, pretty obvious. Are you going new homes sales? Are you going new homes sales? No, no, no, existing. We're sick.

Oh, you're saying. Oh, yeah. So it's got to be down 16 and up five are the numbers? Right. Is that a similar, multi-family? No. Is it price-related? Something about prices.

Yeah, I'm thinking of prices. No. Nope, nope, nope, nope. Oh, must be a month supply? No, that's, that's rising, yes. But no, there's these two statistics are, in a sense, add up to the down. six. I'm down six in total sales. And some part of sales is up 16. Another part is, you know, down five. I mean, excuse me, down 16 and up five. I'm sorry. Is it regional

breakdowns? No, it's down everywhere. Sales are getting crushed everywhere. Tell me when you give. Tell me when you give up. Condo versus single family. That's a good one. That's a good one, but wrong. That's a good guess. Yeah. Christian. should know this because he's like he's the housing guy this is a really important like he's not the top line but not i think going to the report i'm going to put you out of your misery the uh down 16 is the sales to first time homebuyers first time home buyers oh it's the great sales and uh the up five that's uh those are investors in no no no no that's the wrong direction well right right What do you mean? Oh, you mean not good for homeownership is what you're saying.

Yeah. Yeah. Absolutely. Yeah. But it's, I mean, it's interesting that it's interesting that that showed up in the report because I'm in Austin, which is one of the hottest housing markets. And I'm hearing the opposite, that the investors are gone. Oh, really? Yeah. That they were really the ones driving the bidding wars and the outsized appreciation and that with higher rates and now just concerns about value. Correcting, they're gone. And so the only ones left are the home buyers that are hell-bent on getting into their homes. Well, no. Last year, I mean, in 2021, it was all about the investor. I mean, the primary buyer, they were down last year and now they're big time down this year. But both first-time buyers and trade-up buyers, right, trade-up primary buyers because the coupon on their mortgage is well below the current mortgage rate, so they're locked in to significant jewelry. But that's interesting you say about investors in Austin. And there's different kinds of investors. So maybe those

factors on the institutional investor. Yeah, maybe. There's the institutional's definitely in the tech cities, there's also the speculative element to it. Here's the other cool way of looking at it. They're not mutually exclusive. The cash buyer is up 9%. So home sale, as to cash buyers year-to-date through May is up nine. That makes sense. To mortgage buyers, obviously the first-time buyer and the trade-up buyer, down 10, down-ten, down-ten, down-ten. So it gives you a really cool sense of going on. That makes perfect sense.

Yeah. Yeah, very good. Hey, this is going to be a shorter podcast because everyone's got stuff going on. But I did want to end this way, and this is the way we've been ending, Julia, now for the last few podcasts, is recession odds. What are, this is kind of a cottage industry now, you know, predicting the odds of recession. And so the, I'd like to know what your recession odds are over the next year and over the next two years. And I'll let Ryan and Chris go first. Guys, what are your odds and has that changed since the last time we did this a week ago?

Ryan, you go first because you're the, you're the darkest one. Yeah, let the pessimist go first. I think you are. We haven't heard Julia yet. She could be surprised us. next year. I haven't changed it. I think it's 45 in the next year.

Within the next 12 months. Yeah, next 12 months. Yeah. And then within the next two years, 65. That doesn't, he's changing on us, isn't he? No, that's exactly. That's like Sarah. I think he is.

I think Sarah, Sarah's the producer. Sarah, can you start writing these numbers down? I think he's moving on us. No, 65. It's coming in. tickets coming in. Oh, he did see 65. You know why he said 65, Julia? Because we have this forecast philosophy. If we make a major change in our baseline, kind of the middle, the scenario in the middle of the distribution, we have to be very confident in that change. So we have to

subjective probability of over two thirds to make the change. So he's going right up to 65. Right on the line. Not 66. Yeah. Okay. So 45 and 65. 45 next year, 65 next year. Chris, what were your odds? 4060. Unchanged. Unchanged from last week? Yeah. From my previous, oh, I think it last month even. Last month. He's been consistent. He'll be consistently wrong, but he'll be consistent. 4060. Go down with the ship. Yeah. All right. Should I go next before Julia? We'll let you go next. Okay. I'm at 40. percent over the next 12 months in even odds more or less over the next 24 months next next two years. So a little bit more pessimistic than these two other guys. And that I did, that's the same

as last week. I did become more pessimistic after the Fed meeting. I thought that was. Yeah. I had been at one third over the next year and I raised that to 40 percent just because I, that raised raised alarm bells for me the way they handled that. But anyway, so we'll turn to you, Julia, so you've settled in your territory. I think 40 to 45% over the next 12 months. That's up since the Fed meeting because having a central bank telling us they're calibrating off of headline inflation, which he kind of did, right, when he said, headline inflation drives expectations.

Expectations are in a dangerous zone. So in the middle of a gas price spike, that feels like adding fuel to to the fire, pun intended, I guess. And so we were more in the 30 to 35% camp over the next year, just again, because of the starting point in the labor market, so gosh darn strong. And then, yeah, it seems more likely than not over the next two years. Although in some senses, if we make it through this gas price spike.

Totally agree. Yeah. We probably have a longer runway on the expansion. Yeah. I agree with that. The only reason why it's a little higher in two years is because you're two years out. Statistically.

Yeah, exactly. Exactly. So it feels like it's either going to happen. We're either like in the early stages and it'll happen or we're actually some stars are going to align here to take some pressure off, let the Fed cool off. and then the expansion can unfold. I mean, that's certainly the analogy like people like Jim Bullard have been making, which is, and even Chair Powell, the 1994, you know, like we go through a scare.

Right. We've got to tighten up markets. We go through a year of volatility. But then, you know, you kind of unlock a new phase of the expansion. I like you, Julia. You know, I think you're dead on. You guys, you guys, you guys are listening. to this? Yeah. Maybe we can have you back. Would we love to have you back so that we can

gloat. We can gloat. And although I'm a little nervous, if you come back, I'm never going to win this statistics game ever again. Do I get a cowbell? Yeah, we're going to give you a cowbell, an honorary cowbell. You may even get your name on it. Yeah. What? Yeah, exactly. Best swag ever. Yeah, exactly. Well, it was wonderful to have you. And thank guys. really appreciate it. And just a reminder to the folks out there. If you have suggestions for future podcasts, fire away. You know, we can get to us in many different ways. And many of you are. So thank you for that. And we'll talk to you next week. Take care now.