15 Sep Information Unhidden…
On Monday, August 29th, CNBC told us, “Fewer Americans say they are living paycheck to paycheck as inflation begins to ease.” Meanwhile, Jerome Powell’s speech at The Fed’s Jackson Hole meeting was published on August 26th and it tells a rather different story . . .
Key topics:
✔️ “Inflation is easing” yet that’s not what Jerome Powell is saying, nor does it reflect the experience of parents who can’t buy a $25 backpack.
✔️ When he’s talking about a softening of the labor market, do not be naïve about what he truly means.
✔️ “The burdens of high inflation fall heaviest on those who are least able to bear them.” He’s not wrong there.
Links I mention in this episode:
https://www.federalreserve.gov/newsevents/speech/powell20220826a.htm
https://www.cnn.com/2022/09/04/business/back-to-school-expenses-struggle/index.html
Need more? Email me: https://causeyconsultingllc.com/contact-causey/
Transcription by Otter.ai. Please forgive any typos!
Welcome to the Causey Consulting Podcast. You can find us online anytime at CauseyConsultingLLC.com. And now, here’s your host Sara Causey. Hello. Hello, and thanks for tuning in. In today’s episode, I want to talk about information on hidden information that is completely findable, if you care to look. On Monday, August 29, CNBC glowingly informed us that fewer Americans say they are living paycheck to paycheck as inflation begins to ease Well, Glory being hallelujah, I guess that’s just fantastic. The key points, the little TLDR summary, tell us more than half of all US consumers currently live paycheck to paycheck. According to a recent report. However, the number of Americans who say they are stretched thin has started to fall as inflation pressures ease. lower income workers have been particularly squeezed by higher prices this year. Mm hmm. Yes, indeed. However, the week before, the Fed had its Jackson Hole conference. And Jerome Powell, the Fed chairs speech was published on August 26. And you can find it on federal reserve.gov. I’ll drop a link to it so that you can read it in its entirety for yourself. It’s a pretty interesting juxtaposition. Because on the one hand, while you’re being told, Hey, fewer Americans are living paycheck to paycheck, and inflation is beginning to ease. Oh, let’s see the little angels with their feathery wings, strumming their harps. This is just fantastic. Jerome Powell, is telling you a bit of a different story. I want to read from that transcript for you now, price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Now, I’ve been in long enough to say, why is that? What Why is it the responsibility of the Federal Reserve? If we had anything even remotely resembling a free market, there would be no Federal Reserve to do price stability, the markets would be at least theoretically working that out themselves. So just just find that interesting. I’m politically agnostic on this podcast. So it’s not for me to make any further analysis. It’s just for me to ask the question, why is that? I’ll continue to read. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all the burdens of high inflation will fall heaviest on those who are least able to bear them. Well, he’s not wrong there. That is so often the case and even this, in my opinion puff piece that we’re getting from CNBC. Even they acknowledge lower income workers have been particularly squeezed by higher prices this year. I’ll continue to read, restoring price stability will take some time and requires using our tools forcefully. To bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below trend growth. Moreover, there will very likely be some softening of labor market conditions, while higher interest rates slower growth and softer labor market conditions will bring down inflation. They will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain. Yeah, indeed. I’ll continue to read. The US economy is clearly slowing from the historically high growth rates of 2021 which reflected the reopening of the economy following the pandemic recession, while the latest economic data have been mixed. Hmm. In my view, our economy continues to show strong underlying momentum. The labor market is particularly strong, but it is clearly out of balance, with demand for workers substantially exceed Eating the supply of available workers. Inflation is running well above 2%. And high inflation has continued to spread through the economy. While the lower inflation readings for July are welcome, a single month’s improvement falls short of what the committee will need to see before we are confident that inflation is moving down and quote, oh, there’s so much to unpack there, really. But I have warned you for months now that this was coming. The labor market in my opinion has been used as a sort of straw man a distraction. Hey, looky looky over here. Hot job market to open jobs for every one unemployed person. 3.5% unemployment rate. Nobody wants to work anymore. entire generations of folk are just lazy. They’re laid up at the house playing video games, they’re somehow shacked up in grandma’s basement living off those STEMI checks from 2020. People are flush with cash. Look at all of this. Meanwhile, it’s like I sort of feel like this straw man is being used to distract everyone from a giant dumpster fire. Looking over here at the labor market, well, okay, fine, I will take a look at it because I’m in the job market every day as I have been for over a decade now. I know how to read it for me, it is my Bellwether and I have not seen this red hot or white, hot, whatever they want to call it labor market, just blowing and going this year, the way that I did last year, last year. And we can argue the point that perhaps the the FOMO. And the intensity that happened in 2021, was artificial itself. Perhaps it was like what we saw playing out with the FOMO and the Yolo. In the housing market. I’m not opposed to hearing that argument being made. Whatever the case, may be, a lot of people were tired of Bs, and they felt like the great resignation was an opportunity to get to a greener pasture. They wanted to get the heck out of someplace where they weren’t treated. Well, maybe they had a boss that was pushing for RTO. Maybe their boss was just a jerk in general, co workers were backstabby, they were overworked, underpaid, and they said Screw this, I’m out. It’s so easy to find another job right now that I’m not going to sit here and play these games with these morons. And I don’t blame them. You know, I encouraged people to get as much out of the great resignation as possible, because I knew it was not going to last forever. Whatever the pendulum swings severely, in one direction or the other, it always tries to go back toward the middle. At one point or another, it just does. Now some of that is nature itself, nature does try to restore some form of equilibrium. But as I’ve said before, you know, I feel like we’re in this weird K shaped slash pump and dump economy. And so when you have things being, in my opinion, artificially manipulated and driven in a particular direction to have a particular outcome, how can it be anything other than an eventual correction, what goes up must come down. I’ve said before someone is going to get very rich, indeed, off of whatever crashes this time, whoever we’re asked to bail out as the American taxpayer, whatever industry gets deemed too big to fail and has to be bailed out by somebody, somewhere who’s probably already richer than God is going to make a ton of money off this crisis. It always happens. It always plays out that way. And yet people want to sit back and act like, Well, how could this be? We were told that nothing like this would ever happen again. We’ll wake wake up, up, up, up, up, of course, it’s going to happen again. And it’ll happen again after this twas ever thus. So if we look at what we’re being told, clearly, by the Fed, I don’t really give a rip about what we’re being told on mainstream media about people are doing right. Inflation is starting to go down, look into gas prices. Okay. You know, I rather look at what I actually see in my own reality. And still yet every time I go to the grocery store, it’s more expensive than it was the week before. at my local Dollar General, they’re still just taking stickers. They’re not even trying to give the appearance of maybe the price hikes are not so obvious. Wink wink. No, they’ve just given up on that. They’re still just putting stickers over stickers over stickers because the prices are going up so fast. So no, I’m not personally seeing inflation of eight. Then you have that sad story over on CNN about parents who can’t afford school supplies, and a family that makes over six figures a year having to put back a $25 or backpack? But yes, you’re gonna sit here with a straight face and tell me that people are doing great and inflation is starting to go down, right? Of course it is sure. Okay. Nevertheless, this information is not completely concealed. Now if you just go and look at sound bites and quick headlines, you might think, oh, okay, well, if things things aren’t getting better gases down a little bit, and, um, maybe maybe these stories are right, maybe this hopium is correct. Maybe people are doing great, and we’re going to avoid 2008 all over again. I think some people still believe there’s going to be some last minute Hail Mary pass, probably from the government to somehow save this, in my opinion, artificially manipulated, bullcrap economy that they have helped to create. I just don’t see that happening. Maybe I’m wrong. Time will tell. Maybe I am in the wrong on this. I just don’t think so. I think this is going to bring the pain, home and lookie. Here, Jerome Powell is telling you the same thing. Pain is coming. Or that scene I think it was in Rocky three, where Mr. T was talking about the fight released or something like my prediction is pain. Well, here we go. So let’s let’s dissect this a little bit. The burdens of high inflation will fall heaviest on those who are least able to bear them. That always seems to be the case. You know, in reading Alyssa Cortes book squeezed. It really seems sad, but true, that whenever a family gets squeezed out of the middle class, it’s very difficult for them to rebound back up again. Meanwhile, in this case shape scenario, you have ultra wealthy people still going to leave Bhutan, still going to Rome is still going to Gucci. And they’re like inflation. Schmidt inflation, who cares? They’re, they’re still living high on the hog. They don’t care they’re going out to eat, they’re buying their luxury goods. And so it’s whatever to them. That then you think about the family making six figures a year having to put back the $25 backpack and it’s like, Wow, such a disparity between the one and the other, but then the people in the middle. Once they get squeezed out of that middle class income point, it’s very difficult to gain re entry. Something just feels very wrong about that, to me. Reducing inflation is likely to require a sustained period of below trend growth. Moreover, there will very likely be some softening of labor market conditions. Okay, so let’s break this down. As you know, I’m pretty plain spoken. I don’t like a whole lot of fancy finery I like to just get it right out there. So let’s let’s break this down into some serif speak here. Let’s take off some of the, you know, fancy pants language here and call a thing a thing. sustained period of below trend growth. That means some craps getting ready to hit the fan. And this softening of labor market conditions well, okay, in my opinion, we don’t currently have 3.5% unemployment rate. Also, in my opinion, we don’t have two legitimate open jobs for every one unemployed person. Are there segments of the economy that are still hiring, of course, are there companies where they’re dealing with attrition, and if someone resigns in a key position, they need to replace that individual. Of course, even during the Great Recession, there were companies that needed to bring in individuals to replace others that resigned or or whatever I mean, there, there were still people getting hired, it just wasn’t happening super often. It was nothing like the great resignation where, okay, if my boss treats me like poop, then I’ll just leave and within a matter of minutes, I can probably have another job offer lined up. It was not like that it was a very difficult point in time. I’ve also not not been secretive, that I think corporate America will use all of this to its own advantage. In other words, when employment goes up on unemployment goes up. And we’re told, Hey, unemployment is higher than any 3.5% Sorry about this push for our to this push for compliance and obedience will get a lot tighter. Because it will be choose wisely. You can’t just job hop across the market anymore. You’re going to have to sit down shut up and do what you’re told. That will be the attitude. Mark my words. So when he’s talking about a softening of the labor market, what does that really mean? Well, to me, what it means is unemployment. It means hiring freezes, it means layoffs. So to me, I can’t give you advice. I cannot tell you what to do. For me, I would want to have that job loss Survival Plan roughed out. I’d want to know who my first few phone calls would be in case of a layoff in case that goof, something happened that was really out of left field and I got sideswiped, I would want to have that kind of plan. These are unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain. Hmm. So do you think the elite, do you think the top 1%? Do you think that they are going to be bearing this far greater pain? I doubt it. Maybe their investment portfolio takes a hit. Maybe on paper, their assets don’t look quite as good. Maybe their liquidity suffers slightly, maybe. But they’re not having to put $25 backpacks back at the register. Like they would ever even buy a $25 backpack they probably think oh, that’s so good. Oh, she would buy that anyway. Oh, yeah, the far greater pain is going to be borne by people who are not in that wealthy elite class. And unfortunately, when you think about people who were just pummeled in the Great Recession and have never fully recovered, well, here comes, in my opinion, another round of that same insanity. So if someone has not completely rebuilt from the last great recession slash global financial crisis, because I believe it’s going to be global to look at the mess in Europe, that people are, are talking about not paying their energy bills, because of how freaking expensive they are and trying to have like a nationwide strike against the utility companies. I think we will have another global financial crisis. Probably we’re in one right now, truth be told. But you think about people that got absolutely pummeled the last time around, never fully rebuilt, never fully got back on their feet, what in the hell is going to happen to them this time around? How are they going to be poised to face another one? That is a scary, scary thought. It is. The labor market is particularly strong, but it is clearly out of balance with demand for workers substantially exceeding the supply of available workers. Yeah, so remember, that memo that was leaked about how Bank of America thinks you have too much power has the average worker, the balance power needs to go right on away from you and right on back to corporate America? What did you think was going to happen? I mean, it’s being telegraphed to you, in this freaking speech that Jerome Powell gave, this information is not completely buried, you may have to dig for a little bit, you may have to go beyond a soundbite or a quick headline. But in my opinion, it is so worth it. To keep tabs on what is happening. Where is this headed? Not to be paranoid, not to be freaked out or to be Chicken Little, but just simply to have that knowledge and to say, All right, I can’t control what happens in geopolitics. I can’t control what happens on a global scale. But I can do my best to take care of myself and my family. I can rough out that Job lost survival plan, we can cut back on unnecessary expenses, we can try to do some kind of something to weather this storm. Because as he says in that speech, the people who will bear the brunt of this pain are the people who are really least prepared and least able to deal with that pain. I wish that I had some convenient and simple answer. I really do. But I don’t. I couldn’t give you advice anyway. Even if I did even if there was some magic wand I could wave. I can’t tell you what to do. You have to decide what’s best for yourself and your family. I will say that in my opinion, naivete is coming at too high of a price. burying your head in the sand pretending that everything’s fine. Normalcy bias, acting like Pollyanna. Good Vibes only Hashtag blessed. Okay. Some of those people in my opinion not gonna make it. They’re not if if they cannot handle someone asking basic questions about the economy. If they cannot handle someone saying, hey, something seems to be off base here. We’re getting a lot of contradictory information and I’m working to make sense of it all. If they can’t handle basic questions and basic critical thinking. They’re probably not going to make it in my opinion. You don’t have to be one of them. You can use critical thinking you can use good judgment you can caveat emptor. deep, heavy existential sign. I get it nobody that nobody no freaking body wants to go through another great recession slash global financial crisis. It sucked. And totally it did the big When it was awful, but we survived, we survived before and we can survive again. Just have to keep ourselves in the right frame of mind and be prepared for whatever prepared but not scared and not paranoid. In the meantime, stay safe, stay sane. And I will see you in the next episode. Thanks for tuning in. 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