Has America Gone Vegetarian?
Welcome to the Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host Victor Menasce. On today’s show, we’re taking a look at what the Federal Reserve is likely to do at the next rate meeting. I am of the belief that the next meeting will result in a rate cut. You may wonder why I believe so. It is because the employment numbers are heavily skewed. In fact, they are incredibly weak. For instance, we have witnessed only 12,000 jobs created in the month of October in the U.S. Upon subtraction of the 40,000 government jobs created, it translates to the private sector losing 28,000 jobs.
Moreover, it is worth noting that these 40,000 jobs could be largely associated with the U.S election, which ended on November 5. The process of election verification continued, of course, beyond November 5. An election event triggers a surge in hiring. Collectively, there are somewhere between 700 to 900,000 employees involved in the process at both federal and state levels. With the election over, these jobs will be non-existent for at least another couple of years.
Contrary to the strong narrative making rounds, the private sector economy is weak. There is no way the Bureau of Labour and Statistics and Bureau of Economic Research will treat this time period as a phase of growth. In the forthcoming quarters, revisions that look retrospectively at both hiring and Gross Domestic Product (GDP) will occur, and these numbers will be revised downward. As a matter of fact, the next significant revision to the hiring numbers and to GDP is likely to occur in February.
Even if Elon Musk gets his wish and offers those displaced workers a severance package, those jobs will have to go eventually. The threat of tariffs under the new administration is not about tariffs. President Donald Trump’s goal is to bring jobs back to the U.S. that were lost to lower-cost geographies. Possibly, some of these displaced government workers will find newly created jobs in the U.S., but until the policies take effect, the economy will remain unstable. Lower capital costs translate to lower interest rates, hence a stimulus for capital expenditures.
Major upheavals in the executive suites at major corporations attract our attention. Intel’s CEO, Pat Gelsinger, recently stepped down after the company lost industry leadership. The same happened to Stellantis CEO, Carlos Taveras, following a significant loss in market position. While Stellantis’ troubles are global, they’re not just confined to North America. The company’s 14 brands are not enough to maintain market position. Companies are laying off their staff due to the ongoing recession. For instance, Cargill is laying off five percent of its staff or approximately 8,200 workers.
Companies bloated with hiring during the pandemic as prices rose, and revenues associated with these higher prices enabled businesses to afford extra staff. Those days are long gone. The majority of major businesses are on a hiring freeze, and layoff announcements continue. The last couple of years have seen a major expansion in global manufacturing, but jobs are being cut in the current economy. The Federal Reserve has already shifted its stance from fighting inflation to addressing the needs of the hurting labor market. As you reflect on that, anticipate lower interest rates and have an exceptional rest of your day. Let’s make some great things happen. We’ll connect again tomorrow.
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