← Afford Anything | Get Smarter With Money
Afford Anything | Get Smarter With Money
First Friday: We Lost 23,000 Jobs, Yet Somehow Unemployment is Down?!?!
00:56:59
Loading summary
Transcript1 lines
- [00:00]
A
The jobs report is spicy. The US rather unexpectedly lost 23,000 jobs last month, even though unemployment is down. We're going to talk about that. We're going to talk about inflationary fears. We're going to talk about the latest Fed meeting and expectations of what the Fed's going to do in September. We're going to talk mortgage rates. We're going to talk the bond market. We're going to cover a lot right now on this first Friday episode. Welcome to the Afford Anything podcast, the show that knows you can afford anything, not everything. This show covers five pillars, Financial psychology, increasing your income, investing, real estate and entrepreneurship, acronym Double I Fire. Normally on Fridays we air interviews, but once a month on the first Friday of the month, we take a macroeconomic look at the data, what's happening in the economy around us. And so welcome to the August 2026 First Friday episode. The US lost 23,000 jobs in July, according to the latest data released by the Bureau of Labor Statistics. They always release their data on the first Friday of the month, which is why we do these episodes on the same day. But, and here's the weird part, even though we lost 23,000 jobs, the unemployment rate almost also dropped from 4.2% down to 4.1%. Meanwhile, we also revised June's total. So in June, originally the BLS reported that we had grown by 57,000 jobs. They did a revision, which is standard procedure, but they downwardly revised June's total down to 20,000. They also downwardly revised May's number, but originally May was reported to have gained 129,000 new jobs. That was downwardly revised by half, dropping to 66,000 jobs in May. So just to go over that again, downward revision shows that we grew by 66,000 jobs in May, which is half the number that we previously thought. Downward revision shows that we grew by 20,000 jobs in June, which is one third of the number that we originally thought. And the report for July shows that we lost 23,000 jobs. That was a huge shock because across the board, economists were expecting a job gain of 95,000 jobs. So it very much defied expectations. And when we talk about expectations, we should also talk about the ADP report because the ADP publishes a two days prior to first Friday. They are a private payroll processing company and they always publish a report based entirely on private sector data. And the ADP report showed an increase of 44,000 jobs in July. Between a positive ADP report and overall analyst expectations. The fact that we lost jobs in July really caught a lot of people by surprise. That being said, the unemployment rate has also declined. And the number of people who are applying for unemployment benefits. And we'll talk about this in more detail later in this episode. But the number of people who have applied for unemployment benefits is at its lowest point since 1969. So if you're wondering how is this possible, how could it be that we shed jobs and yet unemployment is also ticking down? How are both of those things simultaneously possible? Well, there are a couple of possibilities. One possibility is that more people are deciding to become self employed. So the BLS issues two different types of surveys. One is called the establishment survey. This is a survey where they ask businesses and government agencies about their payrolls and they count the total number of jobs. So in the establishment survey, they're looking at the number of payroll jobs that are out there. So if a person decides to become self employed, they're not counted. If a person holds two jobs and then later they decide to go down to only one job, that would technically count as a job loss, as the reduction of one payroll job, assuming that that job does not get filled by somebody else. So that individual would still be employed, but now they've gone from two jobs down to one. That's how the jobs report is assembled. It's counting the number of payroll jobs that are out there. By contrast, the unemployment rate uses a different survey. The unemployment rate asks people, individuals about their work status. And so if you're self employed, you count. If you used to have two jobs, but now you only have one job, your status doesn't change. If you give up entirely and decide that you're no longer actively looking for work, then you would no longer qualify as unemployed. Because unemployed only references people who want a job but can't get one. And that's reflected in a different stat called labor force participation. Those are some of the factors. Multiple job holders, self employment. Those are some of the factors that can make these numbers move in opposite directions. Or it could also be. Remember I mentioned that revisions are a standard part of the process. It could also be the case that this number might get revised, possibly even into something positive. So we will have to see whether or not this number withstands the revisions, because there are standard revisions that happen. But it's also the case that when we look at the revised numbers for May and June, they don't look good. So we are very much in a low hire, low fire environment. We'll talk more about that later in the episode. But the other thing that I want to note from the data is that the hiring that is happening is really concentrated in just a couple of healthcare, private education and social assistance. We're seeing a lot of jobs in those areas. We're seeing some jobs in construction, some in transportation and warehousing, but we're seeing mostly stagnation in manufacturing and wholesale trade. And, and we're seeing declines in leisure and hospitality, in retail and in financial services. It's actually notable because the data is seasonally adjusted. It is notable that we're seeing declines in leisure and hospitality given that we just hosted the World cup across June and July. So we shed jobs in the leisure and hospitality sector even while hosting the World Cup. Either there's some seasonal adjustment error in the data, or the leisure and hospitality sector has figured out how to be as productive as it needs to be with fewer people, or the leisure and hospitality sector is shrinking, or some combination of the three. Overall, the jobs report really tells the story of low hire, low fire. We're not growing many new jobs. If you zoom out and you take the average of the last three months, we're averaging growth of around 20,000 jobs a month. It's not great. But also unemployment is at historic lows and has remained steadily low for a long time. And the Fed's job, if you think about the role of the Fed, their job is to keep unemployment low. That's part of their dual mandate, to keep unemployment at a manageable number. Their job is not necessarily to create the conditions for job growth. Their job is simply to not let unemployment get out of hand. And given that unemployment is low, then even if jobs aren't being created, as long as unemployment stays low, they have some freedom to be able to raise interest rates if that's what they choose to do. And that leads to our next story. So I just did something I've never done before. I bought a 30 year bond. I know, right? I have never, never have I ever owned a 30 year treasury bond before. In fact, I had to go to Treasury Direct and set up an account because I have always had an all equities portfolio. But 30 year bond yields hit 5.2% and I couldn't resist. Impulse buy. Standard disclaimers apply. This is not investing advice. I'm not telling anybody what to do. I'm just talking about what I myself personally have done and how this ties into what's going on in the world around us today. The saga began last week when the Fed met and had, in Kevin Warsh's words, he's the Fed chair In his words, a quote, good family fight. And if you're like, wait a second, he said that before. Yes, he has. That is like his favorite phrase. The Fed met and they had a good family fight and they voted to hold rates steady. There were three dissenting votes, but overall, they voted to hold rates steady. And investors got spooked. And so because investors got spooked, the yield on long term bonds hit the highest rate that it's been at since 2007, highest rate in almost 20 years. What does that mean? This might be a good time to unpack some of the basics of what is a bond, how do they work and why is this yield such a big deal? A bond is a loan that you give to an entity. In the case of Treasuries, it's a loan that you give to the US Government. The reason it's considered so safe is because the US Government would have to default on its debt for you to not get paid back. That is highly unlikely to happen. It would be more likely that a company might default on their debt, that a city or a state might default on their debt, or for some other country. Sure, those are all more likely scenarios as compared to the scenario of the US Government defaulting. If that's the last entity that would default. And if that ever happens, then we're all living in Armageddon anyway. So may God have mercy on your soul. For that reason, treasury bonds are considered very, very, very safe. If, and this is crucial, if you hold them to maturity. By maturity we mean for the duration of time. So if it's a 30 year treasury bond, if you hold it for 30 years, then they'll pay you back the loan that you gave them. And throughout that 30 year period, you also get fixed payments every six months. Now the term for this is coupon payments, but it's not like a coupon from a grocery store. Basically you get a payment every six months for letting them borrow your money for 30 years. Thirty years from now, I do not get paid back an inflation adjusted amount. 30 years from now. I get paid back the same nominal dollars. That means If I put $10,000 into a 30 year bond today, then 30 years from now I would get back 10, $10,000. But that $10,000 30 years from now would have decreased purchasing power. And so it's those coupon payments, those payments that I get every six months, that's where the real investment value of the bond is. And so when we say that a 30 year bond is now at a 5.2% yield what we mean is that over the span of the next 30 years, I get paid at that 5.2% rate and 30 years from now, I will get paid back the face value of the bond. So the reason that even though I've had an all equities portfolio until now, the reason that I decided to buy some bonds is because I could lock in 5.2% for 30 years in a very low risk manner. Oh, oh. One caveat. Unlocking it in what I have actually locked in are the payments and the face value. At the end, it's still up to me to reinvest every coupon payment. And if yields fall, then my checks are going to keep arriving at the same dollar amount, but the money that I redeploy is going to earn less. So caveat there. Why is it 5.2%, like when people say bond yields are spiking? Why? What does that mean? Fundamentally, investors are saying, hey, if you want to borrow my money for the next 30 years, you need to pay me more. And right now the definition of more is the highest point that it's been in the last 20 years. Well, 19 years to be precise, the highest point that it's been since 2007. So why would investors say that? Why would investors collectively say, if you want to borrow my money, you have to pay me more? It's because as a group, we're very worried about inflation. And that's why we're demanding a higher bond yield, because we need to make sure. Well, we can't make sure, but we want to increase the odds that the payout that we get will hopefully, but not guaranteed, hopefully beat the rate of inflation. Now, if we want a guarantee that it's going to be protected from inflation, we would not buy 30 year treasury bonds. We would buy something different called TIPS. TIPS are Treasury Inflation protected securities. They have a lower yield, but they have a guarantee that they will keep pace with inflation. So with a 30 year treasury bond, you do take the risk that the rate that you lock in may or may not beat inflation. But if that happens, let's say that inflation gets even worse, what would happen is yields would climb even higher. And if yields climb even higher, then what that means is that the price of that bond on the secondary market would drop. So now we're introducing a new concept, this new concept of the secondary market. Up until this point, everything that we've talked about hinges on the assumption that I'm going to hold this thing for the next 30 years. But what if I decide that I don't want to hold it for 30 years. What if five years from now I want to get it this money? Well, I bought it through TreasuryDirect, so I would have to transfer it to a brokerage like Schwab or Fidelity or Vanguard. And then through one of them, I could sell it on the secondary market. But the price that I would get for it depends on whether yields at that time are higher or lower than they are right now. If at the time that I want to sell it on the secondary market, if yields are higher, if yields have climbed to 7%, then if I were to sell it, I'd be taking a haircut. I'd be selling it at a lower price. By contrast, if yields are lower, then I would make a nice profit off of that sale. Or the other option is I could just hold it to maturity, which is 30 years in this case. And if I do that, then I'm guaranteed to get the face value back. There's your crash course bonds 101. And now let's talk through the consequences of what it means to have such a high yield. Because it sounds scary when you say that this is the highest yield that we've had since 2007. If you want to scare people, just say the word 2007. If you were born in the 1900s, you remember 2007, and you remember what followed 2008, and none of us want to relive that fun fact. Babies that were born in 2008 are now old enough to vote. In my first take of this episode, I was going to say we all remember 2007. 2008. And then I realized there are adults listening to this show who actually don't remember 2007, 2008. But ask someone over 30 what that time was like. It was unpleasant, and we don't want to go back there. That's why it sounds very scary to say that bond yields are back at that level. So let's talk through the consequences of that. Number one, every other investment now has to compete against this much safer alternative. Remember, we already discussed why treasury bonds are considered so safe. And so if you can put your money into something that is really freaking safe, if that is your comparative baseline, then any alternate investment that you decide to put your money into, stocks, real estate, any alternate investment needs to have a decent chance of a big upside in order to justify that risk premium. So this might, and I want to emphasize the word might, it might mean that fewer people buy stocks in real estate because they decide that stocks don't adequately have a risk premium that justifies that additional level of risk. And if fewer people buy stocks, stocks in particular, if fewer people pile into equities, that could potentially trigger a recession. Or particularly because we seem to be on the precipice of a big AI boom, it could be the case that equities just absolutely smoke bonds and the risk is well worth it and the stock market keeps booming and we all live happily ever after. Either of those possibilities could play out. But what we do know is that across the economy, bond borrowing is going to be, or already is more expensive. And so when borrowing gets more expensive, it gets harder for companies to justify making those investments. And so if companies slow down their spending because borrowing is more expensive, that could trigger a recession. But of course, if that happens, then the Fed would lower interest rates, but they're not doing that. They're actually moving in the opposite direction. They're likely going to raise interest rates at their next meeting. Why? Because inflation is running out of control. It could be possible that we're heading for stagflation, which is a combination of high inflation and economic stagnation. That possibility is on the table. But one of the core pillars of stagflation is high unemployment, and we are not seeing any evidence of that. In fact, and we'll talk about employment a little bit later. In fact, we're seeing the opposite of that. Applications, spoiler alert. Applications for unemployment benefits are now at their lowest level since 1969. We're going to talk more about that later, but that's a spoiler alert for an upcoming segment that we're going to talk about in a moment. So we've got high inflation. We currently have an economic boom which may persist or may stagnate or may even backslide. And we have currently very low unemployment, which means while stagflation is on the table, it is not a central concern right now, largely due to the fact that we have such high employment. To recap and to wrap this all up, when long term bond yields spike to their highest point in two decades, as they have right now, one of two things could happen. It might be the case that investors decide that stocks don't have enough upside to justify the risk compared to those high bond yields that leads to investors, well, I guess like myself, selling out of some of their equities positions and into those bond positions as, as I've just done, although I've only done so with a very small portion of my portfolio. But it. This is a microcosm. Investors like myself, I've been all equities. I've sold out of some of my equities. I've used it to buy some bonds. And that might happen in mass where investors decide to get out of equities and go into bonds because they don't think that the equity risk premium is justified and that causes the stock market to drop. That could trigger a recession. So that that is one possibility that's on the table. Or it could be the case that investors are totally gung ho about future prospects and they're super optimistic and they're super bullish and they keep piling into stocks and stocks keep outpacing the high bond yields and then everybody makes lots of money. That is also a possibility. Both options are on the table and we will have to stay tuned to see where this goes. Earlier I mentioned that applications for unemployment benefits has fallen to its lowest point seasonally adjusted since 1969. We're going to dive into that, plus much more right after this word from the sponsors who make this show possible. In business, there's no room for guesswork. Every shipment matters. Every deadline counts. When you're trying to keep operations running smoothly, the last thing you need is uncertainty. That's why reliability is at the core of USPS Ground Advantage. From the moment your package is first scanned in, it moves through a secure nationwide network, aiding in a timely and accurate delivery. You get near real time tracking so you can keep up with your shipments. And with affordable upfront pricing, there are no hidden fees or surprise surcharges to throw off your cost sheets. It all adds up to predictable deliveries you can depend on, because knowing your logistics are handled lets you focus on everything else your customers, your team, and the future you're building. Visit USPS.com ground advantage to start shipping with confidence. USPS Ground Advantage we mean business. You've heard me talk about Cozy Earth bedding, but Cozy Earth also makes these incredible beach towels. When I was a kid, beach towels were scratchy. Like I remember from childhood, beach towels were something you'd lay out on the concrete next to the pool. They were scratchy and they were rough and it was not something that you would really want to wrap yourself in. But Cozy Earth's beach towels. They're lightweight, they're oversized, they get softer with every wash, they feel great and they look beautiful. There's an assortment of classic stripe designs, very resort, different colors, finished with a bold stripe. Cozy Earth also has a great collection of everyday bath towels so you can create a spa like luxury resort feeling in your own bathroom. Towels that Are really plush, very absorbent, really elevated so that you get that bit of luxury in your day to day life. Oversized, ultra plush and completely built for your best summer days. Head to cozyearth.com and use my code affordanything for an exclusive 20% off. That's code affordanything for 20, an exclusive 20% off. And if you see a post purchase survey mention that you heard about Cozy Earth right here, you know we all have a money story, a relationship with money, a feeling about money. And that story evolves over the years. I know when I was in my 20s, I had a relationship with money that was really driven by fear and anxiety and scarcity. And one thing that really helped me was knowing my numbers. Because if I had a really strong sense of all my numbers, everything coming in the door, which was not much, and then everything going out the door, that gave me a sense of control. And back then I would track it with a spreadsheet. But now there are much better tools and the one that I like is Monarch. So Monarch is a centralized dashboard that helps you manage your money. And it's not just backwards looking. You know, there are a lot of tools that will tell you what you have spent, but Monarch helps you look forward. Monarch helps you set goals, map out big purchases and see if you're on track and then make adjustments if you're not. And it tracks everything. Your accounts, your investments, your savings goals, your spending. I use it to look at my net worth, but I also use it to look at, you know, the net worth is at that big 30,000 foot view level, but then transactions at the day to day level. I use it for both. Monarch also has AI insights that will help you spot things that you wouldn't normally think to look for. So write your own money story with Monarch. Use code affordonarch.com to get your first year of monarch Core how to half off at just $50. That's 50% off your first year. @monarch.com with code afford A F F O R D. Applications for unemployment benefits are at their lowest level since 1969. What is particularly great about this is that applications for unemployment benefits is a more accurate measure than BLS data. Because bls, the Bureau of Labor Statistics, they collect a small sample and then they use very fancy math to extrapolate that to a larger population. But that fancy math is often wrong. That's actually not a bug, it's a known unknown. And that's the reason why the BLS has three revisions. So after one month they'll do A revision after. After two months, they'll also do a revision, and then annually they do another revision. And that is a standard part of the process. But applications for unemployment benefits, that is much more straightforward. You've either filled out the form or you haven't. You've either applied for unemployment benefits or you haven't. There's less that can go wrong there. Now, the data is adjusted month to month for seasonal variation. So it's not raw data. It is adjusted data so that we can take seasonal context into account. But other than that, it's pretty clean. And by clean, what I mean is it's less subject to interpretation, it's less subject to errors as compared to BLS estimates. That's why it's such a big deal that we see that applications for unemployment benefits are now at their lowest level since 1969. So specifically for the week ending July 18, initial jobless claims fell to a seasonally adjusted 187,000. That's a decline of 22,000, and it is the lowest weekly total since the week ending September 6, 1969. And when I initially wrote about this, I said that this was good news for job seekers, and someone made the point, and I thought this was an excellent point. It may or may not be good news for job seekers. It's definitely good news for job holders. We are in a low hire, low fire environment. If you've got a job, you're likely to keep it, but if you don't have one, it is still tough to get one. And particularly if you're young. We know. And we had an interview recently with Beth Kobleiner, who pointed out the unemployment rate for people between the ages of 22 to 27 is higher than the rate for the general adult population, meaning that people in their 20s specifically are having a disproportionately harder time finding a job. In other words, entry level jobs are the hardest to get. So we're left with the task of squaring data that on the surface, feels a little contradictory. On one hand, unemployment is at historic lows. Conversely, employment is at historic highs. Labor force participation is high. Unemployment claims are at their lowest since 1969. And simultaneously, youth unemployment is outpacing that of the general population. And what we can infer from that is that not only are more people in their 20s unemployed, it's also likely that that many people in their 20s are underemployed, working in jobs that are not befitting their level of training or skill. I was on a panel recently with someone who was talking about how frustrating it is to apply to jobs and have AI screen out your resume. AI can feel like a cudgel, a crude instrument that screens out a lot of highly qualified candidates. And if you are feeling that way and you're frustrated about your job search, remember that small and mid sized companies are less likely to be using AI as screening tools as compared to large companies because big companies have a huge volume of applicants that they need to sift through. While small companies, a company with less than 50 employees, they might not be getting that same volume. But the thing is, if you go to a job fair or a career fair, you, you're not going to see small companies there because who takes out booths at job fairs or career fairs? Big companies, because a big company that has a hundred job openings to fill, they're going to take out a booth at a career fair. A small company that has one or two job openings to fill, they're not going to take out a booth. That doesn't make any sense. And so often when people are applying, particularly young people, you go to your college career fair, the one that's held on campus, you're only going to see these big companies there because by definition, those are the ones who show up to career fairs. So look for smaller employers, they're less likely to use AI for screening. They're often more nimble, more flexible. Also remember, getting an introduction from someone or getting referred by someone is often the best way in the door. I have a nuanced take on networking events because the whole like meeting in some ballroom to eat hors d' oeuvres and sip a sauvignon blanc while having the same small Talk conversation with 50 people that is not in any way providing value to anyone. If you're under 25 or even under 30, if you haven't yet made a name for yourself, built a reputation, you're just starting out, you're new to a field, I should say. I guess I should amend this if you're under 30 or you're midlife, but making a midlife career change. So if you're brand new to a field and you are literally just trying to get a bunch of cold introductions because you are the new kid on the block. All right, that makes sense in that circumstance. Outside of that, the best way to meet people is not by like juggling a puff pastry with a business card or these days it would be your LinkedIn QR code. The best way to meet people is not by doing that. It is by providing some degree of value In a way that makes people talk about you because you want to be salient. When somebody hears about an opportunity, you want to easily come to mind. And if all you've done is stood in a crowded room having the same insipid what do you do? What do you do? Conversation over and over and over, that's not memorable. And your job is to be memorable. That comes from providing value. So some advice to job seekers out there. Speaking of jobs, I saw this really interesting chart. It came from the Fed's Survey of Consumer Finances. And it is your income categorized by your age from 1989 through 2022. And it's adjusted for inflation and tracking that. So specifically it is pre tax family income by age, classified by age of reference person. And if you look at this chart Again, from 1989 through 2022, every age cohort is doing better than they were in 1989, again, adjusted for inflation. So the under 35 crowd of today has a higher income and is doing better than the under 35 crowd of 1989. And that remains true for every age cohort. So 35 to 44, 45 to 54, 55 to 64. Actually, that age cohort peaked in 2004. So the ages 55 to 64 cohort is not doing as well as they were in 2004, but they are still way better off than they were in the late 80s. One thing to bear in mind, and again, we talked about this in the interview with Beth Kobleiner. So if you haven't listened to that, go check that one out. That's a really solid one. And it specifically focuses on the 20s and 30s age cohorts. One thing to bear in mind is what I have just told you is flattened cudgel information about the entire under 35 cohort. But inside of that there's a lot of variation. The experience of being 24 today is wildly different from the experience of being 30 today. Because if you are 30 today, that means you are around 22 in 2018. Which means if you've been investing in your 401k since the age of 22, let's say you, you graduated from college at 22 and opened a 401k account and you've been contributing to it regularly ever since, you probably have some assets that have grown over the last eight years. And that's why sometimes it can be, as I talked about with Beth, it can be a little flat to talk about people in their twenties in these broad brushstrokes. When a five or six year age gap can be decisive in terms of the assets that you've been able to accumulate. That being said, there is at least when we zoom out and we look at big broad strokes of giant clusters of age cohorts, there is good news, which is every age cohort is doing better than they were as compared to the year of Taylor Swift's birth, 1989. Mortgage rates have hit their highest level in over a year. The average 30 year fixed mortgage rate is as of Monday about 6.78%. Again, that's a one year high. And there was a big increase between June and July. So at the end of June rates were 6.5%. By the end of July they were 6.8%. Remember, it was last week that the Fed met. So on July 29th the Fed announced that it was going to hold interest rates steady. And after they made that announcement, investors, as measured by the CME Fed Watch tool investors, investors overwhelmingly began to predict a rate increase in September. Part of what is happening right now, not just with bonds, but also with the mortgage rate because mortgage rate is tied to the ten year treasury, investors are pricing in the probability of a rate hike in September. You know, the irony of a rate hike and this is not commentary on whether or not they should hike rates. I'm just, this is just the inescapable irony of the way our system is set up. The whole reason that the Fed raises rates is to keep inflation under control. But raising rates influences the ten year treasury, which impacts mortgage rates, which makes housing more expensive. And so the very tool that the Fed uses to combat inflation actually makes the single biggest factor in the cost of living, which is housing in it makes that cost of living more expensive. There are some people who say, yeah, well, but higher rates might lower home prices as a result of reduced demand. Historically that has not happened. Historically there has been a weak positive correlation between higher rates and rising home values. Now I will emphasize it is a weak positive correlation, but directionally that has been the correlation. And largely that's because the Fed typically raises interest rates at times when the economy is booming, because that's usually when inflation is a concern and the Fed feels the need to put the brakes on the economy. And it is typically, historically speaking, during those boom times that the price of housing goes up. Now that doesn't mean it necessarily has to be the case. And of course supply plays a huge role in this. I think the examples that we see in both Austin and Central Florida show that we have examples of an economic boom coupled with home Prices decreasing if you can flood the market with enough supply. When we look at historic trends, historically we have not seen higher rates, higher mortgage rates, lowering home prices through reduced demand. Again, I'm not commenting on whether or not they should do it because certainly raising rates reduces overall borrowing and that decreases the velocity of money. And the Fed basically has two factors to work with. They've got the supply of money and they've got the velocity of money. So how much money is there and how quickly does it change hands? And raising rates overall means that money, generally speaking, changes hands more slowly or less often. Fewer people transact, companies borrow less, and overall, the idea is overall inflation comes down, but in the meantime, mortgage rates go up, so housing becomes even more expensive. I say this largely because I've been spending a lot of time lately thinking about issues related to housing affordability. We are going to have an excellent interview. Well, I think it's excellent with Kenny Burgos. He is the CEO of the New York Apartment association. And it'll be a deep dive into the economics of housing in New York City. Obviously, New York is very different from the rest of the country, but what a fascinating place, infinitely nuanced, infinitely complex. As I've been spending hours prepping for this interview and just peeling back the layers of the onion on housing, you know, there is perhaps nothing more important, both for an economy and for an individual. There is perhaps nothing more important than getting real estate right, financially speaking. I mean, for an individual, your career, of course, but outside of that career, the home or homes that you purchase, because most people don't just purchase one home and live in it for the rest of their life, the homes that you purchase, that is disproportionately your biggest expense. And then if you buy investment properties, rental real estate, a small handful of properties comprise a large portion of your portfolio. Getting it right is critical. And that starts with, like, a deep, deep understanding of how real estate works. So that's true at the individual level, and then you zoom out to the broader economic level. And real estate is the backbone of everything, of family, of mobility, of your ability to pursue a career by virtue of being able to move to a different geography where you don't have friends or family. All of that is to say that among the many things that I've been really thinking about for, I'd say probably about a month now, really deeply thinking about are the constellation of factors, from mortgage interest rates to the supply of lumber and copper to density caps and zoning restrictions, how all of this comes together to create this housing affordability crisis that we have in most parts of the country right now. All of that is to say the Fed is likely to raise interest rates in September. In fact, they are so likely to do so that arguably that is at least to some extent being priced in to the ten year treasury which is already reflecting in mortgage rates. That effect may get amplified in September when the Fed actually does raise rates if it doesn't get fully priced in beforehand. And so mortgages which are already at a one year high are likely to stay high, if not climb higher. And that means the lock in effect, which is people who hold low interest rate mortgages two handle or three handle or even four handle, mortgages who don't want to give up their existing mortgage and therefore are have a golden handcuff scenario where they are locked into the home that they have. That lock in effect is expected to persist. A couple other points I'll make before I round out the shower thoughts on real estate Pending home sales rose 1.3% nationally year over year in July. That's the eighth consecutive month of gains. So homes are moving, buyers are active, they're signing contracts. Seasonally, there tends to be a cooling off period, nationally speaking, during the summer. Of course, your region may vary, but data from the Census Bureau shows that single family new home sales ticked up by 1.6% in June to a seasonally adjusted annual rate of 628,000. Directionally, that's good. It's subtle, but it's directionally good. Same deal actually with home prices. National list prices are down 2.4% from last year and 20% of active listings had a price reduction in July. So sellers are adjusting their expectations in order to get their properties to move in order to attract buyers. But we are seeing one thing that's interesting when we start looking at the data is that we are seeing more variation between the states. So New York state, so I just mentioned nationally list prices are down 2.4%. In the state of New York, prices are up 8%. By contrast, in Tampa, list prices per square foot are down 4.8%. So that delta between so Tampa is down almost 5%. New York is state, New York state is up 8%. So we're talking about in terms of percentage points, a Delta of nearly 13%. That delta is even bigger when you look at Austin. So Austin has seen an 8.5% drop in price per square foot. So there, I mean comparing Austin to the entire state of New York, we're talking about a delta of 16 and a half percentage points. Now I get. New York City is very unique and it has its own very, very specific set of circumstances. But New York State as a whole does not have to have the inventory constraints that it does. But what we've seen is that there are big inventory constraints across the entire state of New York that is keeping competition really fierce and is forcing prices upward in spite of these higher mortgage rates. Austin, by contrast, it saw huge, huge supply like the. It saw oversupply, frankly. It saw over investment. It saw oversupply. And now what it's seeing is that inventory supply correction, which is the reason that prices are dropping there. That's why you contrast Austin with San Antonio. What we're seeing in San Antonio right now is that homes on the market are moving a lot more quickly. The velocity. We talked earlier about velocity. San Antonio is seeing really, really heavy transaction volume, but they're seeing it at a much lower median price point. The median home in San Antonio is 299,000. Now, I should say both places have a spate of problems, including high property taxes, very high insurance costs, and in Florida, skyrocketing HOA fees and structural inspection laws, which have caused a lot of special assessments to happen, which has particularly hit the condo market really hard. But the thing that I think is fascinating about this is seeing a double digit delta. This is a wider divergence than anything that I have seen in the decade that I have spent analyzing the housing market. There is a tremendous mathematical gap. And so real estate is always fascinating because it is such a high stakes arena. The divergence that we're seeing right now in regional real estate behavior is just bananas wild. Part of why I study it so closely is because across the country we're running a whole bunch of AB tests in real time, but all with unique characteristics. So none of them are perfect comparisons to one another because each one has complicating factors that make it unique. But that's all the more reason why it's critical to take a nuanced, data driven look at real estate and not to rely on pithy slogans or reductive frameworks. As a general rule, the more that you hear people attribute something to a single source, the less likely that is to be true, because real estate is influenced by such a complex cacophony of factors. That's the latest in the housing market. We're going to take a moment to hear from the sponsors who make the show possible. You've heard me talk about Cozy earth betting, but Cozy Earth also makes these incredible beach towels when I was a kid, beach towels were scratchy. Like I remember from childhood, beach towels were something you'd lay out on the concrete next to the pool. They were scratchy and they were rough and it was not something that you would really want to wrap yourself in. But Cozy Earth Speech towels. They're lightweight, they're oversized, they get softer with every wash, they feel great and they look beautiful. There's an assortment of classic stripe designs. Very light resort, different colors, finished with a bold stripe. Cozy Earth also has a great collection of everyday bath towels so you can create a spa like luxury resort feeling in your own bathroom. Towels that are really plush, very absorbent, really elevated so that you get that bit of luxury in your day to day life. Oversized, ultra plush and completely built for your best summer days. Head to cozyearth.com and use my code afford anything for an exclusive 20% off. That's code afford anything for an exclusive 20 percent off. And if you see a post purchase survey mention that you heard about Cozy Earth right here. I got a question for you. How much time do you waste scrolling on social media? Are you getting paid for that time? Of course not. But a lot of the times when we're reaching for our phones, it's in that downtime when we're standing in a long line or when we're in the waiting room when we couldn't reasonably be doing anything else. We waste that time. A lot of us scrolling on social. What if you could make some money during that time instead? Here's a side Hustle opportunity. There's this thing called Earn House. It's a free online platform that connects people with paid survey opportunities. So you can view available surveys. You can see the estimated time it would take you to fill one out and the dollar reward. You can see all of that up front and you can earn money like real money. If you qualify for and complete a survey, it's completely free to create an account and to participate. The estimated survey time and their reward are shown up front and rewards are displayed in actual dollars, not like confusing points or tokens or anything like that. And it's a way to earn some extra income. Which in my view is better than just absentmindedly scrolling social media. Get started now. Sign up@earnhouse.com Paula that's E A R N H A U S.com Paula P A U L A if you're a small business, the right hire can be make or break. Hoping the right people see your job. Posting isn't the best growth strategy. When the pressure's on and you need the right hire. This is a job for Sponsored Jobs we recently hired two people with Indeed Sponsored Jobs. One was for customer support and operations. The other was an ea, an executive assistant. We used Indeed Sponsored Jobs to find both candidates. We got a lot of applications. We found people who understood our workflow who could contribute right away. People are finding quality hires on Indeed right now in the minute I've been talking to you. Companies like yours made 27 hires on Indeed. According to Indeed data worldwide, Sponsored Jobs posted directly on indeed are 95% more likely to report a hire than non Sponsored jobs. Join the 3.3 million employers worldwide that use Indeed to connect with quality talent that fits their needs. Spend less time searching and more time actually interviewing candidates who check all your boxes. Less stress, less time, more results when you need the right person to cut through the chaos. This is a job for Indeed Sponsored Jobs and listeners of this show will get a $75 sponsored job credit to help get your job the premium status it deserves@ Indeed.com podcast just go to Indeed.com podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com podcast terms and conditions apply. Need to hire. This is a job for Indeed Sponsored Jobs. Welcome back. Gold Prices are Weird. So gold was in the toilet for a little while. Earlier this year, gold fell by nearly 30%. So in January it was trading at 5,600 per troy ounce. By July, over the span of those six months, it fell down to a bottom of below $4,000. So a fall of about 30% in the span of six months. Well, some slightly good news for people who have held on. Gold prices are now at a two month high, so they're currently trading between 4300 to 4400. They have not yet regained the peak that they were at in January, but they're starting to rebound a little from the bottom that we saw in July. Why is that? Well, a few reasons. Number one, worries about inflation. Because in periods of high inflation, people tend to flock to tangible assets like gold, real estate, art and so increased inflationary worries can drive the price of gold up. Worries about a cooling economy can also drive the price of gold up. The thing about gold is that it doesn't have any interest payments. Earlier I talked about the beauty of holding bonds is that you get those periodic payments. When you hold a bond, you are giving a loan and therefore you earn interest on the loan that you're giving. Gold isn't like that. Gold doesn't pay any interest which means it is not an income producing asset. Which means it's a speculative asset. People buy it if they think that other people will buy it. People buy it only because they believe that the price is going to go up because of increased demand. Why would you increase demand for gold? Probably because you're worried about inflation, but by virtue of buying gold. You know we talked earlier about the 30 year yield, right? If you're buying gold, that comes at the opportunity cost of not buying a 30 year treasury and what that means, given that the 30 year treasury yield is so high, it is currently as of today, Friday August 7th, it is at 5.2%. People who are buying gold see that as a risk. So people who are buying gold aren't looking at the 30 year treasury yield and saying wow, what an attractive return. They're looking at the 30 year treasury yield and saying wow, that is a red flag. That is a risk. That is a warning sign. That interpretation is totally valid. This is why I say like it was, why I really mean the caveat that when I talk about myself entering bonds for the first time, it is not investing advice. I fully acknowledge that the people who are looking at that saying I don't see that as an attractive return. I see that as a evidence of risk and as a warning sign. That's a completely valid interpretation. It is not my interpretation, which is why I didn't put my money that way. But it is a valid interpretation and there is a very, very real possibility that they may be right and I may be wrong. That possibility is on the table and has a decent likelihood. That's what investing is. Investing is. Risk investing is starting with the base knowledge that you might be wrong and the base knowledge that a lot of people are actively doing, dumping long term bonds and piling into gold as a safe haven. Because in periods of stagflation, gold really thrives. And remember we talked earlier about how stagflation is on the table. It is a possibility. So yeah, gold has been beat up for the first six months of the year. But there is right now there's been a two month slight rebound and there may or may not be a case for another gold rally. Time will tell. But we are seeing around the world global central banks are increasingly buying gold and part of that is because they want more independence from the US dollar. They want to de dollarize. Do you remember we talked about this many, many first Fridays ago but there was actually a, a movement to try to create an alternative global reserve currency that ultimately went nowhere. And it's not likely to happen. But there was an attempt to do that for a while as many central banks around the world started saying, you know what? We're starting to lack confidence in the US Dollar and we no longer want that to be the world reserve currency. And again, it's not going to happen. It's not realistic, or I should say, it's unlikely. We can never state anything in absolutes, but it is highly unlikely to happen. That ethos does explain, in part, one of the reasons why so many central banks are going after gold, and particularly we've also talked about how inflation is worldwide. Inflation is happening as a. It's a global concern. And that's another reason why so many central banks and so many investors in general are piling into gold. So it's just an interesting asset class to watch. I personally do not own any, but I understand why someone would. I personally like real estate as an inflation hedge because again, in periods of inflation, pile into tangible assets. For me, that's real estate. But I get it. And I want to emphasize it in what we've talked about, and I've said this before, if you really want to understand what's going on in the economy, don't look at the stock market. Look at the bond market. Watch what the bond market is doing. And I would add to that, watch the gold market. Those two markets, the bond market and commodities and gold in particular, will speak volumes about what's going on in the economy, much more so than the stock market. The stock market is not the economy. The bond market kind of is. All right, the final story to close out today, since this is the August 1st Friday episode, I want to cover all of the economic news from the previous month, the month of July. On July 4, the 530A accounts were officially launched for public contributions and initial funding. So the 530A account, depending on what side of the aisle you are on, is sometimes also referred to as Trump accounts and sometimes also referred to as Invest America accounts. So half the population calls it Trump accounts, half the population calls it Invest America accounts. And if you're a financial professional, you know it as the 530A account. Kind of like, you know, 529, 401K in the way that we refer to all of these accounts by their section in the tax code. These are 530A accounts. So that's how I refer to them. But the big News is on July 4, they were officially launched. The government deposited $1,000 each into more than half a million newly activated accounts. And so babies that were born between 2025 and 2028, so January 1, 2025 through New Year's Eve, 2028, any baby born during that time period is eligible for this government seed money. And whether or not you get the seed money, children, minors, you can open an account for any minor. And parents, friends, family, employers, anyone who wants to support that kid can make deposits into this account up to an annual limit of $5,000 per minor. There are already many private donors, both individuals and companies, that have been donating to fund the accounts. So the Dell family gave over 6 billion. Gwynne Shotwell from SpaceX gave more than 300 million. Brad Gerstner gave money to every child in the state of Indiana. Many companies, bank of America, JP Morgan, Robinhood, have also announced that they will be making contributions. So we're increasingly going to be seeing philanthropists donors make contributions into these accounts. Now, I want to emphasize one thing. This is very important. Any minor child in the US, any child under the age of 18 can have a 530A account opened on their behalf as long as they have a valid Social Security number. So Even though that $1,000 seed money is limited to babies born between 2025 and 2028, anyone with a Social Security number who is under the age of 18 can have a 530A account. They do not have to have earned income. That's what distinguishes it from opening a Roth ira, for example, on behalf of a minor child. Because a minor child with earned income can contribute their earned income to a Roth IRA. But with a 530A, the kid does not need to have any earned income. They can have a 530A account open for them. You can do it by filling out IRS Form 4547. And so if you have a minor child, Please open a 530A account for them. Even if they're too old to get the thousand dollars, the thousand dollar of government seed money, you can still open a 530A account for them. They can get private donations, they can get family contributions. Even if they don't get that seed money, it's still an opportunity to save money in a tax advantaged manner for kids. And that can, I mean, to start the compounding clock that early is a tremendous benefit. Imagine having compound interest that begins when you're 2 or 3 or 4 or 8 or 10. So on July 4, the account's officially launched. If you have a minor child who has a valid Social Security number, please open a 530A on their behalf. That is the August 1st Friday episode. Thank you so much for tuning in. If you enjoyed this episode, please share it with people who could benefit from hearing it. Share it with people with minor children. Share it with people looking for jobs. Share it with people who have questions about the low, high or low fire environment. Share it with anyone who's ever wondered what a bond is and why someone would buy one. Share it with people who are worried about inflation. Share it with people who like gold. Share it with all of those people and more. That is the single most important way that you spread the message of financial literacy and and of fi r e. You can chat about this episode with members of the community by going to affordanything.comcommunity and if you want to know where to put your assets where to put bonds versus Small caps versus Large caps If you want to know what type of account to put what investment in based on its tax treatment, we have a free asset location cheat sheet. You can download it for free. It's a four page cheat sheet. Just a reference that you can use. You can download it for free by going to affordanything. Com assetlocation. Thank you so much for tuning in. This is the Afford Anything podcast. My name is Paula Pant and I'll meet you in the next episode.