Labor Cost Measure Which Banished ‘Transitory’ Comes In Hot
A key measure of employment costs watched closely by the Fed rose more than expected in Q3, data released on Tuesday showed.
The Employment Cost Index posted a 1.1% gain from the prior quarter, ahead of the 1% increase economists expected.
If you're not apprised, this does matter. To recycle language that'll be very familiar to regular readers, it was ECI which, according to his own dramatized retelling, compelled Jerome Powell to change his mind about inflation in late 2021.
Generally spea
So, they keep raising interest rates despite the lack of impact on inflation measures?
If the patient is corpulent, you have to push the scapel deeper to reach the organs?
As a reasonably corpulent individual with the traces of four large holes on the lower half of my torso I’ve always wondered just how my skilled surgeons determined just how far in to go.
That question struck me as well. If mortgages hit 8%, with inflation at 3.5% that represents a 4.5% real rate. Added to the price of the home, that would seem to be pushing hard on continued inflation.
Yes, but it is a double-edged sword. Higher funding costs also impact homebuilders’ access to capital, reducing new supply. Is that part of the reason that higher interest rates are not hammering home prices?
At a higher level, what outcome we are trying to achieve? Is putting housing out of reach for a majority of Americans the desired goal? Did they cause inflation? If not, why should they be the ones targeted?
Why not target spec buyers, from the small buyer of investment properties to the private equity folks scooping up vast tracts of housing to rent out? Other countries seem to be able to put higher downpayment requirements and taxes on those buyers. But it’s a nonstarter in our Congress.
Yes, interest rates are the only tool the Fed has, but I don’t see results that merit the collateral damage they are causing.
Meanwhile, did Pepsi raise prices by 15% again last quarter for the fourth in a row?
Out here in California, we could go a long way toward improving the supply of homes by simply eliminating property tax caps on second properties. Unfortunately, voters are so afraid that they might lose their prop 13 protection on their primary residence that they’ll believe any and all fear mongering related to prop 13.
On a 12-month basis, wage inflation is lagging CPI. To quote the Talking Heads, same as it ever was, same as it ever was, same. as. it. ever. was.
Stop making sense!
In many cities- the cost to rent is about half the cost to own an equivalent home. So with higher real compensation, people who can’t afford to buy a home at these prices are renting and simultaneously enjoying higher savings (for a future home purchase) and/or more discretionary cash to spend.
Even if rates do come down- which could result in more people selling their homes (because their existing mortgage rate is not as advantageous as when lending rates are higher), there will be a lot of “pent up” demand- keeping home prices higher for longer- even as mortgage rates decrease.
Crazy times.