Hoot of the Day: The Fed Predicts an Immaculate Soft Landing

Jack Farley interviews Danielle DiMartino Booth in their best interview yet. Booth blasts the Fed’s unemployment projections.

The current unemployment rate is 4.2 percent. The Fed projects it will rise no more than 0.2 percentage points this year and next.

Let’s tune into that assessment.

Please watch the above video. It’s a great one. First let me get a couple nitpicks out of the way.

Booth praises Powell. I don’t. He kept QE going far too long, and was slow to see inflation that was obvious to the world. He never apologized for the housing mess the Fed created.

And it’s hard to praise a Fed that makes such glowing predictions in its projections and the current state of the economy, then cuts rates by 50 basis points. The cut is just another example of Fed asymmetric policy.

I also disagree with Booth on the Truflation model. I think it is very flawed on housing and would be willing to discuss with Truflation or Danielle.

I mention these things only because they come in at the beginning of the interview and you may inclined to cut a great video short. That would be a mistake.

Too Late to Rescue the Economy

Regarding “Its too late”, I am 100% in agreement with Booth.

We both think a recession has started. Originally, she pegged October of 2023 as the recession start based off the McKelvey indicator. In the interview, she revised that to no sooner than April.

It’s was Booth’s colorful rebuttal of the widespread soft landing thesis that had me clapping.

“For there to be some kind of immaculate soft landing that the Fed can somehow engineer, that only moves the needle on an unemployment rate that was rounded down to 4.2 percent, they think it’s only going to increase by 0.2 percentage points between now and the end of 2025, I think Jesus Christ himself walked through the front door right now. They know that history dictates that the unemployment rate will rise in earnest.”

“To presume that this is all of a sudden going to hit a brick wall, and America is going to wake up in a fully certain environment, with an election hanging over us, and that companies are going to start hiring again, is absolutely asinine.“

My wife managed to hear that last part and we both started laughing out loud. There is plenty more in the interview, but that quote made me stand up and salute.

Booth also discussed how gig jobs are suppressing the unemployment rate, soaring tech layoffs, commercial real estate, and the Fed Beige Book among other things.

Playing the interview will be an hour well spent.

Related Posts

September 9: Fed Beige Book Conditions Are Worse Now Than the Start of the Great Recession

That is a point Booth mentioned as well.

September 10:  The McKelvey Recession Indicator Triggered, But What Are the Odds?

Think of a Richter Scale with earthquakes. I suggest the odds of damage (recession) increases in a non-linear fashion as both indicators get above a certain level.

Flat out, I came up with about a 78 percent chance but downgraded that a bit.

September 16: Claudia Sahm’s Recession Denial Theory Flunks a Simple Data Test

Sahm explained there was no recession because the labor force was expanding. I did a fact check on that idea: In 7 of 10 recessions, the labor force was higher in the third month of recession than the start of it.

September 19: The Ominous Reason Continued Unemployment Claims Have Improved

This is a key idea. People have already expired their benefits. I add those unemployed for more than 26 weeks to arrive at much better numbers.

September 22: 21 Million Renter Households Spent Over 30% of their Income on Housing Costs

The evidence a recession has already started is overwhelming. I think April is early, but it’s possible.

The NBER likely won’t place the date for at least a year.

Meanwhile, on the political side, I wonder if companies are trying to hold off on layoffs until after the election. I suspect they won’t be able to do so.

The jobs report on November 2, might be quite interesting. The election is on November 5.