Morning Brew Daily - Fed’s Latest Rate Cut Reveals Uncertainty & Workers Turned Off By RTO Policies

Episode Date: December 19, 2024

Episode 478: Neal and Toby break down the latest decision by the Fed to cut rates and what it could mean for next year. Plus, why the proposed government spending bill has to be re-worked and why companies who have returned to office policies are not hiring at the same rate as companies with remote policies. Plus Neal shares his favorite numbers which include an interesting Alzheimer's study, 'straight edge kids' and football games clashing with weddings. Finally, all the headlines you need to know ahead of your Thursday. Build your Range Rover Sport at landroverusa.com Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

Many employees can't afford a hefty medical bill that pops up out of the blue, but it happens. And employees who are financially stressed are, understandably, more likely to be distracted at work, costing their employers greatly in lost productivity. Luckily, AFLAQ plans help with out-of-pocket expenses not covered by health insurance and can be offered at no direct cost to businesses. Learn more at aflac.com slash morningbrewdaily. That's aflack.com slash morning brewdaily. Good morning, Brew Daily Show. I'm Neil Fryman.

And I'm Toby Howell. Today, Congress thought it had a deal to avoid a government shutdown this Saturday. Then Elon Musk entered the chat. Then the Fed issued its final rate cut of the year. So why did your stock portfolio tank? It's Thursday, December 19th. Let's ride. Good news, Neil.

You can finally plan that trip to Washington State you've been putting off. That's because officials announced yesterday that the so-called giant murder hornets have been successfully eradicated from the state following a years-long effort to find and eliminate the non-native pest. Murder hornets were first cited in the area all the way back in 2019, but state officials quickly mobilized to try and contain their presence due to the threat the giant insects posed to their honeybee and other pollinators. Consider that threat contained, too. No hornet has been cited in the last three years. Thank goodness, Neil. Giant murder hornet is probably the most appropriate name ever given to an animal. These things can be two inches long.

Just think about a hornet that's two inches long in your head right now. They can wipe out an entire honeybee hive in less than 90 minutes by decapitating the bees there and then defending the hive as their own, all while using the brood to feed their baby hornets. They can also sting through beekeeper suits to deliver almost seven times the amount of venom as a honeybee and sting multiple times. That's why an entomologist in the Washington State Department of Agriculture said, I've been doing this for over 25 years now. It is a rare day when the humans actually get to win one against the insects. I'm not going to lie.

I remember the peak of Murder Hornet panic back in 2019, 2020. We are all in lockdown and we're like, now the murder hornets are coming for us as well. So thank goodness. They said the public played a huge role as well, taking pictures in reporting sightings. Because of course the public played a role. If I saw a two-inch murder hornet, I would say something as well. So congrats to Washington State. Plan your vacay there.

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landroverusa.com. That's land rover usa.com. Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the unreal college deal, everything you need to study and play with

select Windows 11 PCs. Eligible students get a year of Microsoft 365 premium and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer. While supplies last ends June 30th, terms at AKA.m.m.S. College PC. To no one's surprise, the Fed announced its third and final rate cut of 2024 yesterday, reducing the benchmark rate by 25 basis points, down to a range of 4.25 to 4.5%. So why did all three major indexes finish deep in the red?

While the rate cut itself was all but guaranteed, it was the Fed's cautious outlook for 2025 that had investors a little spooked. The Fed is now projecting only two cuts next year, as opposed to the four that were anticipated back in September. The Fed also revised their forecast for inflation to 2.5% up from the 2.1% it originally projected. In Jerome Powell's press conference after the announcement, he tried to frame a few rate cuts as a vote of confidence in the economy. But he also said that the cuts announced at this

meeting were a closer call than expected due to just how sticky inflation has been. So, Neil, as we close out 2024 with a pretty strong economy, slowly fading inflation in a stable job market, the question becomes what comes next? And Powell said two rate cuts next year. That was not welcomed by investors. The Dow had its 10th straight day in the wreck. read the S&P had its worst day since August. Yields jumped, which shows that borrowing costs are rising the mortgage rate jumped above 7% for the first time. This was a very violent reaction. I think investors who had believed Powell knew what he was doing for the past couple of years saw a little uncertainty in what Powell was projecting for the future. And I think an even

bigger question was, why do we have the rate cut now? A lot of the press conference, Powell spent talking about how inflation was sticky and he's worried about inflation. Well, the last thing you want to do when you're worried about inflation is cut rates, which is what he did. So I think those two factors, lower fewer rate cuts next year, and then failure to explain why they cut rates this time led to an extremely violent market reaction. Right. A lot of the reporters there asked some variations of that same question, is if inflation is proving to be stickier and you're projecting it to be stickier, then why did you even cut rates on this media? whatsoever. And it wasn't guaranteed. Even though remember the market was pricing a 99% chance or a 90 plus

percent chance that the Fed would cut rates this meeting, there was actually a dissenting vote of the Fed officials that do vote on these rate cuts. So it wasn't, it was a lively discussion, I think, at that table, like, should we cut rates this time around? Powell's response was in effect that future rate cuts aren't guaranteed. So like, let's do it while the economy is still strong and inflation isn't too high. So rather like a bird in the hand is worth two in the bush type approach. But you're right. The market definitely did not like that, especially because, you know, the projections got

so much darker, essentially. We were looking at four rate cuts. Now it's down to two and that could shift even lower if this inflation proves to be as sticky as, you know, Powell is saying it is. Yeah. I think the general interpretation of what Powell was saying was that this was a pause, not a skip. So the next Fed meeting is in January. If Powell signaled that they would just skip a rate cut then and then continuing the rate cuts going forward, I don't think the market would have

reacted like it did. But this was a signal that they're kind of pausing this for now. And one thing I also want to talk about is that, you know, Powell was asked about Trump's policies and how that would impact inflation and rate cuts. And, you know, economists do widely view Trump's policies of tax cuts, mass deportations, tariffs, as being inflationary. So you know Powell is going to get pelted with questions about how that would shape the inflation and rate cut outlook. He demurred. He said that, you know, it's too early to tell. It's very premature to try to make any kind of conclusion.

You know, Powell and Trump were both in their same positions in 2018 and 2019 when Trump enacted a bunch of tariffs on China. Powell said we can't really learn that many lessons from those tariffs about what might happen in 2025 if there are more tariffs. We are entering a state of uncertainty that we haven't seen in a few years. Powell compared it to driving on a foggy night or walking in a dark room full of furniture. You just slow down. So the word, I think, is caution. Let's get Powell on the pod because that's actually a very nice analogy. Congressional leaders released the text of a three-month spending bill on Tuesday that was supposed to prevent a government shutdown.

But the stopgap spending bill has a lot of people big mad. Inside the over 1,500 page bill were a few head-scratching inclusions. There's $100 billion earmarked for disaster relief in the wake of a devastating hurricane season, economic aid for farmers, and a commitment to fully fund a rebuild of Baltimore's Francis Scott Key Bridge. But there's also a cost of living pay increase for members of Congress, reforms for pharmacy benefit managers, and a measure that clears the way for the Washington Commander's football stadium to be moved from Landover, Maryland back to D.C.

Two of the most vocal opponents of the bill were none other than Elon Musk and his Doge co-head, Vivek Ramoswamy. The two wasted no time in flexing their budding political power, railing against this stopgap bill. Elon alone posted on X about the funding bill more than 100 times over the course of the last two days, and it worked. House Majority Leader Steve Scalise told reporters that the current iteration of the bill is now dead, while Trump himself voiced his opposition to it as well. You know, this was supposed to be a pretty uncontroversial bill so Congress could regroup and figure out what their priorities were in the new year, but it's proven to be just the opposite.

This is what they call an end-of-year Christmas tree bill, which is where all the lawmakers see this bill that needs to get passed to avoid a government shutdown, which will happen if they don't pass this at 12.01 a.m. Eastern on Saturday. And all they just start decorating it with their own pet projects. you see something like the RFK stadium getting, you know, moved to D.C. So that the commanders could get back to the district and these other small pet projects. And, you know, it wasn't loved by a lot of right-wing conservatives when it was released. But it seemed like it could potentially pass with helps from Democrats.

And then all of a sudden, I wake up yesterday morning. I see Elon Mustfeed going absolutely off. She's showing himself to be an absolute force, even though he's not an elective representative. has no official position in government, but he is using his bully pulpit on X to move the needle. And then later in the day, President-elect Trump came out and said, this bill is a disaster. And it looks like they will have to go back to the drawing board, even though we are less than 36 hours away from a government shutdown. Right. It put Musk out a little bit on a limb in the early days because despite some of that opposition from congressional Republicans, like no one had really come out because, again, it is one of those end of year bills. It is just a tide over to keep the government running for the next three months.

But must said absolutely no. He weighed in and said, like, this bill shall not pass. He loved that meme. He posted that multiple times. He literally posted over 100 times about this, really flexing his weight. Some people started to say, though, that this is a interesting strategy from Elon because right now he's spending some political capital, getting in on a day-to-day skirmish. Like, this is not, in the grand scheme of things, the biggest thing.

the biggest thing that Congress is going to be facing over the next four years. But here he was tweeting a hundred times about it, even before Trump gets into office. So is he spending that political capital too early and too frequently? That was some of the kind of analysis of this, even though technically his, you know, bullying Congress is working in this particular instance. So what would a shutdown mean if it were to happen? For people who are, I guess, five years old, you have lived through a government shutdown before from December 2018 to January 2019. Essentially all non-essential federal employees

stop working. So at that time, 350,000 were furloughed. But then you have the essential federal employees like TSA and air traffic controllers who still will work but without pay and then they get back pay. At that last pre as that previous government shutdown, 420,000 federal employees were working without pay. So we have this. big, busy holiday travel season coming up, and you're probably going to encounter TSA agents and air traffic controllers who are not being paid. So that is a very interesting conundrum. So we have until tomorrow to get this bill passed, and we'll see if they go back, streamline it, and take out all of the pork that had been criticized and pass a new one. But certainly, Elon has thrown Congress

a curveball, and it's certainly a sign of things to come. Less flexibility for employees means lower headcount. That's the conclusion of new research from Ravellio Labs, which found that companies requiring return to office grow their workforces more slowly than companies that allow hybrid work. Since June 2020, companies with hybrid work policies have increased their headcount by 1.6% for businesses mandating that employees commute to the office, that growth rate is 1%. Now, this could be intentional.

Remember, workers have long suspected that return to office mandate. were a sneaky way for companies to lay off employees without laying off employees. And one executive seemed to confirm as much. After Amazon announced a five-day in-office requirements starting in January, the AWS CEO said if employees don't want to comply, that's okay. There are other companies around. But hiring fewer people means you're also hiring fewer All-Star people. A separate study from the University of Pittsburgh noted brain drain as a significant cost of RTO mandates.

The research found companies requiring in-office work took significantly longer to fill job openings and suffered abnormally high turnover, which is consistent with the other study showing slower growth. Toby, do you think corporate bosses are going to look at this and think, hmm, maybe we should be more flexible? Seems like the downsides of an in-person requirement outweigh the advantages. Potentially, but like you said, a lot of these companies that did implement RTO policies were hoping that they would see some turnover. that was kind of the hidden thing that a lot of these companies were going for. They wanted to trim down their workforce without actually conducting layoffs. Where I do think you will see some of these companies taking pause, though, is that if you're skilled employees and if your more senior employees are more likely to leave,

that is something that you do not want. You mentioned brain drain, but yeah, some of these high position or higher, you know, pay grade positions are more difficult to feel, and you do not want that to experience a lot. lot of turnover. So I do think you potentially will see some pods, which we've already started to see some companies kind of rethink some of their RTO plans because they haven't gone as smoothly as they expected. Well, I think you're talking about Amazon. So Amazon, the announcement that they were going to go five days a week beginning in January, kind of shock the HR world. They are the biggest company that ever in the world that would require five days to work

in office. And it spurred a cascade of other companies like Dell and AT&T to announce return to office requirements. But reports in the past few days showed that Amazon has told certain employees, it could be in the thousands in certain cities like Dallas and New York, that their offices are not ready to get people back five days a week. They just don't have enough office space. They didn't prepare. So they told them that they would have to come back into the office, but not until April or May. So there have been a lot of logistical challenges. It's one thing to say, yeah, we want you back in the office. It's another thing to, you know, get the office ready and have the Kierig pods already and make sure there's enough

deaths so people aren't huddled all over each other. So Amazon's return to office drama just took another swerve. The last swerve of this study that I want to speak about is not just the quantitative effect of RTO policy, but also the qualitative effect. A lot of employees cited why they hated RTO. One of it was just the drama that follows it. The Amazon, so much drama follow this announcement. And a lot of employees just want to work. They do not want to be constantly mired in this debate. So that was one thing. And then another thing they talked about is that when you institute RTO, you're communicating a culture of distrust saying that you're tracking our bad sign-ins. Like you are making sure we're coming in. Dell was doing VPN tracking

to see if people were trying to pretend they're working from one location when they weren't. So it's not just the quantitative factors and effects. It is also just the qualitative employee morality. affects that, you know, you have to take into account. Speaking of taking into account, there's one more left in the year. It's the last Neal's numbers coming your way. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting $179, like the next grill 3-burner gas grill. Or get $50 off a select Weber Spirit grill and bring big flavor to your backyard.

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My first number will have you thinking twice about using your GPS. A new study released in the British Medical Journal found that taxi drivers die at lower rates from Alzheimer's than people in other professions. which maybe suggests that using your brain to navigate the world could ward off the disease. After examining 9 million adult death certificates, researchers found that around 3.9% of everyone in the dataset died of Alzheimer's, but for taxi drivers, the rate was just 1%. That is not to say that driving a taxi is healthy. In general, they had lower life expectancies compared to the average. But as far as Alzheimer's is concerned, it got to scientists thinking that creating spatial maps

in your mind all day could mean a big. bigger hippocampus, which is the part of the brain responsible for learning, memory, and navigating. These implications are actually really big because what it's implying is that there are things you can do during your lifetime that could potentially reduce your risk for dying of Alzheimer's, which is something that, of course, researchers want to dig into. Some other interesting things from this finding, too, is that people who had jobs that involved navigating to a predetermined route think bus drivers, airplane pilots, ship captains,

they did not have a lower rate of Alzheimer's. So there is something about the fact that you do have to spatially reckon, you do have to memorize these routes that did contribute to lower Alzheimer's rate. So that was just a fascinating thing, that it's not just using navigational abilities. It is the fact that you cannot be riding a predetermined route. Now, some critics of the study, and there were many, noted some limitations. First of all, the age of death of taxi and ambulance drivers, ambulance drivers were the number two lowest. risk after taxi drivers was around 64 to 67 years of age, and Alzheimer's doesn't really set in until 65, so they noted that criticism. And then there's the potential that there's a self-selection

going on, the fact that, hey, people who have bigger hippocampi just naturally gravitate to being a taxi driver. So the causation correlation effect doesn't really work, because maybe it's not the fact that I'm driving a taxi gives my brain a workout. It's that I really like navigating and going through cities. That's why I'm gravitating to be a taxi driver. So those are just two of the limitations pointed out. This is not a definitive study, but it certainly raises really interesting questions about how creating spatial maps in your mind can give your brain a good workout.

For my next number, America's youth are more straight edge than they've been in decades. An annual national survey of teens showed that substance use is hitting new lows while abstaining from drugs is hitting new highs. For example, about two-thirds of 12th graders said they hadn't used alcohol, marijuana, cigarettes or e-cigarettes in the last 30 days, the largest share since measuring began in 2017. These findings have shocked public health officials in the best way. Drug and alcohol use among teens fell the most in history during the pandemic when kids were at home with their parents instead of playing beer pong with their friends. But researchers fully expected the toking and drinking to pick back up when COVID was over. that hasn't happened. Instead of rebounding, drug use has continued to fall years after stay-at-home rules were lifted.

Yeah, I think it's because a lot of teens who do end up experimenting with drugs or alcohol, they usually start in the ninth grade, your first year of high school, because you see a lot of your older peers doing it. But if you break that cycle in the incoming ninth graders, never saw anyone, you know, drinking or smoking, never experimented with their friends. Then as you filter through upwards through the generations, every class after, that class, the COVID class, is not going to have that experience either. So it is almost a self-fulfilling cycle where you start to see lower and lower usage rate. So I think that was interesting

because a lot of people's experimentation doesn't happen in your own room under the supervision of your parents. It happens when you're surrounded by friends, when there's peer pressure involved. So it is a really fascinating, you know, downstream effect of those COVID lockdown periods. For my final number, a question for everyone planning your wedding. Would you pick a date to avoid a conflict with a football game? For Lovebirds in college football hotspots, the answer seems to be yes. The Washington Post dove into data from the knot

to find that for the majority of areas with powerhouse college football programs, Saturdays where the local team isn't playing are more popular wedding dates than game day Saturdays. Here's some actual numbers. In and around Auburn, Alabama, 3.8% of the year's weddings

took place on each of the team's idle fall Saturdays since 2022. That's compared to home game Saturdays, excluding Thanksgiving weekend, when an average of 2.1% of the year's weddings were held. Let's look at one specific date to October 22nd, 2022. Toby, you remember this date? All right. So the Auburn Tigers had a buy week. In that market, in the Auburn market, 5.3% of the year's weddings took place that day compared to 3.1% nationally. The Washington Post interviewed wedding planners in the southeast to see if this data was backed up by their own

experiences. And they said, absolutely, people do try to plan their weddings for days when the team isn't playing. And this makes a lot of sense to me. There's nothing worse than having to split your attention between the fourth quarter on your phone and the beautiful couple exchanging their vows. I get that too, because I've been at weddings where people are watching college football games. And it is a little bit of knowing. But also just the logistics side of it, I think is under talked about because college football weekends are a zoo in these towns. So, like, traffic's a nightmare. Hotel rooms are hard to come by. They're very expensive. as well. So I totally understand from that perspective. They also talked to some couples,

though, that just gave up and said, hey, if there's going to be a game on, let's embrace it. Let's, one couple created a game lounge at the reception venue where people could go watch the game. If it is such a big part of your family that people would not be paying attention to your wedding, might as well set up a screen and have everyone watch it together. I can't really. I mean, we're sports fans, but that's pretty hard for. That is pretty hardcore. I cannot relate to it because we don't have, I mean, I'm an Indiana fan now this year, but I can't, I never had that, you know, crazy love for college football. So, I mean, shout out to all the Southern couples out there. I know it's, it's bigger. It just means more down there. Let's sprint to the finish with some

final headlines. TikTok will fight for its life at the Supreme Court, which said yesterday, it will hear arguments on a law that would ban the app on January 10th, nine days before it goes into effect. TikTok is arguing that the law, which compels its owner, bite dance to sell it, or else face a ban in the U.S. violates the First Amendment. Congress passed the measure earlier this year, citing national security concerns posed by this immensely popular Chinese-owned app.

But for TikTok, there is hope the Supreme Court agreed to hear this case. Yeah, just the fact that the Supreme Court is setting aside time for oral arguments shows that the justice do see at least some critical questions about the First Amendment here. I know we've talked a lot about this TikTok saga, but this is probably the time where we are going to be. to finally get a decision one way or the other. So if you've been kind of tuning it out, this is the time to, you know, tune back in. I want your prediction. Ban or no ban? I think. Is the Supreme Court going to stay it or let it go?

See, it's hard. I don't know what the Supreme Court will actually argue on the grounds of First Amendment, but I think overall eventually the app will not be banned just because there's so many logistical issues to it. So I'm going to say no ban. That Toby says let it ride. The first severe bird flu case was reported in the U.S. the CDC said that a patient in Louisiana has been hospitalized with bird flu, which is the first confirmed severe case of the H5N1 illness in the U.S. More than 60 mild human cases of bird flu have been reported this year, following an outbreak that has killed 123 million poultry since 2022 and infected more than 860 dairy herds.

As for the severe case, the person had been in contact with birds, both sick and dead in backyard flocks, the CDC said. Health officials stressed the risk to the risk to the disease. the human population remains low, but many critics say the U.S. response has not been sufficient. It's not been sufficient, but also there is not just this one case in Louisiana that people are worried about. Also, in California, Gavin Newsom declared a state of emergency over the outbreak of bird flu, specifically related to the state's dairy cattle. They've discovered the virus in 645 hordes of dairy cattle. That's more than any other in the state. They do are saying the same thing. Risk the

public remains low, but there's definitely some threats to these cattle herds. It originally started in Texas, but now California has become kind of the epicenter of this bird flu cattle epidemic. Yesterday, OpenAI unveiled a new feature that lets you call chatGBT directly from the phone number 1-800 chat GPT. It's part marketing stunt and part useful feature addition. If your hands are full in the kitchen and you really want a classic delicious lasagna recipe, but your mom isn't picking up, dial up chat GPT and ask it for an answer. But don't chat for too long. Callers will get 15 minutes of free chats per month.

Neil, is this a good idea? It's not a new idea. That's what I'll say. Back in 2007, Google launched a phone hotline called the Goog 411, which offered free directory assistance by voice. They shut it down three years later without an official explanation. But there was speculation that they used the voice data from using. you calling Google to train voice recognition software.

And Google VP, Marissa Meyer, was later the CEO of Yahoo, basically acknowledged this was the case. So even as far back as 2007, there was controversies around training data. I think it is so funny, too, that every technological advancement we've had this year is something that Google tried 10, 15 years ago. I mean, think about Google Glass. They were early to that. Now we're seeing all this range about meta-ray bands.

obviously all the artificial intel and stuff they were very early too as well. So it truly does say like sometimes just timing the market is as important as actually the features that you are releasing. Let's wrap it up there. Thanks so much for spending your morning with us and have a wonderful Thursday. For any questions, comments, or feedback, send an email to MorningBrewdaily at MorningBrew.com. And if you're enjoying the show, please share it with a friend, family member, or a coworker who needs a 25-minute news blast in the morning. for a more specific sharing idea. Here's Toby.

I want you to share it with the college football fans in your life. This is going to be a very stressful weekend for a lot of you. I hope none of you are getting married either, but send them this pod, send them a little bit of Neil and Toby. Hopefully we can calm their nerves.

Let's roll the credits. Emily Milliron is our executive producer. Raymond Lou is our producer. Olivia Graham is our associate producer. Yichenoa Ogu is our technical director. Billy Minino is on audio. Call 1-800 hair and makeup for a free wardrobe consultation.

Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly Big Board Buckslot Machine by Aristocrat Gaming, Yamava Resort and Casino at San Manuel is giving one person a $1.6 million dream package. The biggest prize in Yamava's history. Club Serrano members can earn daily instant prizes and secure a spot in the finale May 29th. Don't pass go and own it all. Only at Yamava, celebrating its 40th anniversary.

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