Fed rate hikes are to blame for housing market slowdown: Anthony Chan

Channel: Fox Business
Published: 06/04/2019 08:04 PM

Former JPMorgan Chase chief economist Anthony Chan on the state of the U.S. economy, the housing market and the Fed. FOX Business Network (FBN) is a financial news channel delivering real-time information across all platforms that impact both Main Street and Wall Street. Headquartered in New Y...

Mark twain once said, reports of my death have been greatly exaggerated and the same can be said for this economy. The news is always more interested in disasters than positive stories, but more recently the focus has been on possible disasters while completely ignoring any good news. Now the last couple of weeks has seen several misses on key economic data points, but also lots of positive data, ...
ncluding reports that have been better than wall street consensus. Case-In-Point yesterday well may auto sales for 2019, their first monthly gain of the year. Despite a string of predictions that that industry was going to fall off a cliff last month, in fact, many big, auto companies don't even posttheir internal numbers, but we did get numbers from the number three number four automakers toyota up: 3. 2 percent fiat up over with two Percent, you know, of course the economy is cyclical and it will move lower, but i wonder if it will be reported properly instead of politicized, i'm very worried about the constant negative median doomsday guessing on individual investors. Efforts and all that note i want to bring in former jp morgan chase a chief economist, anthony chen, and i think, thanks for coming in, i have to be you're one of my top five economists. Ok, i don't know where you fit in there, but i love your work. I love your straightforwardness and thefact that you're a political, that's right. Where do you see the economy because there are obviously weak spots, but it also shows resolve that keeps surprising people. I feel very good about the economy. We have very tight labor markets, we're gon na get an employment report on friday.

I think it's gon na be very good. I think we're gon na probably get a number in the 175 thousand gains for non-farm payrolls. So i really see good stuff now. Charles i've actually done research that actually forecasts when you're gon na get a recession, and i look at that yield curve. There'S a whole bunch of different versions. But i look at the ten to two years and i look atthe index of leading economic indicators when both of them flash recession signals. If you go as far back as the data will take you, it has a hundred percent track record and right now that 10 to two-year is not inverted. The index of leading economic indicators has not dropped three consecutive months and that usually tells us 11 months into the future to get a recession, i'm not getting those signals. So i'm feeling good about the economy over the next day. Love that the inversion has been with the three-month in the 10-year the three months, the 10-year and, of course, a ten-year to the fed funds rate. Those two have converted slightly, but that ten-year thetwo year has not, and neither has the index of leading economic indicators. Given you any recession, signals the areas where there are weakness, for instance, housing.

It'S been a chronic problem. Is that something we should be concerned about, or is that telling us anything about the future? Is that mostly a rearview looking thing charles, the housing market slowed down for a simple reason of the federal reserve raise rates? That'S an interest sensitive sector, that's one of the first early sectors that actually feel that effect and then, of course, the fact that housing prices have outpaced wages. At some point, a trend is unsustainable. Doesn'T last that's the quote by herbert stein, chairman the council ofeconomic advisers. Under richard nixon - and i bet you some common sense person said it to him, let me ask you about jay paul's comments this morning. My theory is that he i'm telling you i've listened to a lot of his speeches. He loves the fact that he believes it's. The federal reserve that saved this country that saved our economy - and i don't think, he's gon na. Let us go into recession at least he's gon na try his best, never to let it happen under his watch. No, i think you're spot on charles. I mean what we see is: the federal reserve has two children: they have an employment man, they didn't have a price mandate and rightnow. They don't have to worry about the price mandate that child can make it on its own.

We have a core personal consumption deflator rising only 1. 6 percent year. Over year, the target is 2 % and, more importantly, they're telling you they may move moving to average inflation targeting that is if they continue to under they've under shot for so many years. They can go a little bit hard, but even that is not in it. Right right, so for that reason i think they're gon na let it run a little harder and that's why fed chacham power feels very comfortable with really helping the economy if they see any sign of turbulence whatsoever and he made thatvery clear today, it really did anthony. Thank you very much appreciate it.

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