U.S. employment costs rose at the fastest pace on record in the third quarter as companies across a variety of sectors raised wages against a backdrop of labor shortages.
The employment cost index, a broad gauge of wages and benefits, rose 1.3% from the prior quarter, according to Labor Department data released Friday. The gauge increased 3.7% from a year earlier.
Although there was a record jump in wages and salaries, personal income was reported to have dropped -1.04% in September. On a YoY basis, personal income fell to a 4.15% growth rate. Even more disturbing, the Case-Shiller national home price index is still rising at a near 20% pace.
In the third quarter the median home price hit $404,700, jumping nearly 13% since third quarter of 2020, when the median sales price was $358,700.
Though it’s an eye-catching number, the market has been hot of late, and a lack of inventory and high demand means foretold the rise in home prices.
According to a recent note from Goldman Sachs, home prices could rise another 16% by the end of next year. Goldman economist Jan Hatzius pointed out that of all the pandemic shortages, the housing shortage might last the longest and that a crash is very unlikely.
Sure Jan. That’s what economists were saying in 2007 too before housing prices crashed and burned. Although this time its different: The Federal Reserve hadn’t gone insane buying Treasuries and Agency MBS before the housing bubble burst in 2008/2009.
Freddie Mac’s 30-year mortgage rate rose today to 3.14%.
Notice how Freddie’s 30-year loan commitment rate tracked the 10-year Treasury yield … until Covid struck. Then there was a separation of the two rates.
US pending home sales declined -2.3% MoM and -7.19% YoY as US GDP sinks like a paralyzed falcon,
(Bloomberg) — The National Association of Realtors’ index of pending home sales decreased 2.3% in September from a month earlier to 116.7, largest drop since April, according to data released Thursday.
The median estimate ina Bloomberg survey of economists called for a 0.5% advance.
Compared with a year earlier, contract signings were down 7.2% onan unadjusted basis”
Forecast range from -4.6% to 4.5% from 30 economists surveyed
Signings declined in all four U.S. regions from the prior month, led by a 3.5% drop in the Midwest Unlike existing-home sales, which are calculated when a contract closes, the index of pending home sales is based on contract signings
Treasury Secretary Janet Yellen: “What, me worry?”
Despite the staggering and unorthodox monetary stimulus from The Federal Reserve, US real GDP continues to fall. The Q3 real GDP report is out and real GDP QoQ fell to 2%. Not surprising given that the Atlanta Fed’s GDPNow tracker is at a dismal 0.195% and falling.
The culprit? Personal consumption fell to 1.6% in Q3 after hitting 12% in Q2.
The GDP price index actually declined slightly from 6.1% to 5.7%.
Of course, Bloomberg blames the decline in GDP on supply constraints … which were created by The Fed and Federal government dumping trillions of dollars of stimulus. While the monetary stimulus is still raging, Federal government stimulus has worn out. To paraphrase BB King, “The fiscal stimulus is gone.”
Yes, The Federal Reserve and the Federal government reacted insanely to the Covid crisis and created a total mess (including ill-advised government lockdowns of the economy, stimulus to households who already were employed, etc.)
Bloomberg News headline of “U.S. Posts Weakest Growth of Pandemic Recovery on Supply Woes” misses the point that The Fed and Federal Reserve CAUSED the supply woes. It reminds me of an episode from the British comedy series “Blackadder” with Rowan Atkinson, Hugh Laurie and Stephen Fry.
General Melchett: [explaining why they can’t rescue Captain Blackadder] Now George, you remember when I came down to visit you when you were a nipper, for your sixth birthday? You used to have a lovely little rabbit, beautiful little thing, do you remember?
Lieutenant George: Flossie.
General Melchett: That’s right, Flossie! Do you remember what happened to Flossie?
Lieutenant George: You shot him.
General Melchett: That’s right! It was the kindest thing to do after he’d been run over by that car.
Lieutenant George: By *your* car, sir.
General Melchett: Yes, by my car. But that, too, was an act of mercy when you remember that that dog had been set on him.
Lieutenant George: *Your* dog, sir.
General Melchett: Yes, yes, my dog. But what I’m trying to say, George, is that the state young Flossie was in after we’d scraped him off my front tyre, is very much the state that young Blackadder will be in now: if not very nearly dead, then very actually dead!
Despite monetary Stimulypto from The Federal Reserve (still growing!), US real GDP has fallen to almost zero.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2021 is 0.2 percent on October 27, down from 0.5 percent on October 19. After the October 19 GDPNow update and subsequent releases from the US Census Bureau, the National Association of Realtors, and the US Department of the Treasury’s Bureau of the Fiscal Service, a decrease in the nowcast of third-quarter real government spending growth from 2.1 percent to 0.8 percent was slightly offset by an increase in the nowcast of third-quarter real gross private domestic investment growth from 9.0 percent to 9.3 percent. Also, the nowcast of the contribution of the change in real net exports to third-quarter real GDP growth decreased from -1.56 percentage points to -1.81 percentage points.
Mortgage purchase applications rose 3.24% from the previous week, according to data from the Mortgage Bankers Association. However, purchase applications are down 9.3% from
Mortgage refinancing applications declined -1.57% from the previous week as mortgage rates rose from 3.23% to 3.30%.
And with a wave of her magic wand, Treasury Secretary Janet Yellen (aka, the Incredible Janet Yellenstone) will make inflation magically return to less than 2% after mid-2020.
Treasury Secretary Janet Yellen said she expects price increases to remain high through the first half of 2022, but rejected criticism that the U.S. risks losing control of inflation.
Inflation is expected to ease in the second half as issues ranging from supply bottlenecks, a tight U.S. labor market and other factors arising from the pandemic improve, Yellen said on CNN’s “State of the Union” on Sunday. The current situation reflects “temporary” pain, shesaid.
“I don’t think we’re about to lose control of inflation,” Yellen said, pushing back on criticism by former Treasury Secretary Lawrence Summers this month. “Americans haven’t seen inflation like we have experienced recently in a long time. But as we get back to normal, expect that to end.”
On Friday, Federal Reserve Chair Jerome Powell sounded a note of heightened concern over persistently high inflation as he made clear that the central bank will begin tapering its bond purchases shortly but remain patient on raising interest rates.
The S&P 500 Index posted its first decline in eight days, while benchmark Treasuries rallied to send 10-year yields down by the most in more than two months. Inflation expectations remain elevated — the 10-year breakeven rate of 2.64% is within 15 basis points of the record high reached in 2005 — and rates traders maintained bets the Fed will hike at least once within a year.
Powell said policies are “well-positioned” to manage a range of outcomes.
So Janet, are you saying that home price growth is going to slow to 2% YoY after mid-2022? Or that the Biden Administration is going to build the Canadian pipeline to help ease energy costs? Or that west coast ports get magically unclogged? Or that chips for cars will magically begin appearing?
I forget. The Fed doesn’t consider housing or energy prices in their inflation measurements. So, Yellen and The Fed ignore that most important expenditures for households.
The Fed’s breakeven inflation rates are considerably lower than current core inflation (green line).
No wonder Yellen and Powell can make inflation magically disappear. Don’t count it!
US new home sales rose a whopping 14% in September as the median price of new home sales rose 20.1%.
Existing home sales still remain low allowing median prices to soar with Fed money printing.
New home sales surged as The Fed turns a blind eye to out-of-control inflation in prices.
Thanks to The Fed, new homes under $150,000 have disappeared and new homes over $500,000 have grown to 31% of all new homes. Where have all the starter homes gone?
Between Fed stimulypto and massive over-spending by Congress and the Biden Administration, the economic system is clogged like an interstate toilet, driving construction prices soaring.
Apparently Fed Chair Jerome Powell and Treasury Secretary Janet Yellen have never experienced clogged plumbing in their homes. And President Joe Biden has probably forgotten.
I can’t wait to hear if Biden’s press secretary Jen Psnarki attempts to put a positive spin on this debacle.
Between The Federal Reserve’s unorthodox monetary policy and insane spending from Congress and Biden Administration, we are seeing a near 20% rise in home prices for August.
Please note that pre-COVID the Case-Shiller home price index (national) was growing at 4%. Thanks to Fed Stimulypto, home prices are roaring at near 20% YoY.
Phoenix AZ home prices are growing at a 33.31% pace. The slowest growing? The US “shoot ’em up” capital, Chicago, is growing at 12.72% and is the slowest growing Case-Shiller 20 city.
I feel like I am living in the movie “Cloverfield” with The Federal Reserve as the uncontrollable monster.
UPDATE: Columbus Ohio as of Q2 2021 is growing at a 13% YoY pace.
Confounded Interest - Anthony B. Sanders 
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