Morning Report: Janet Yellen sees the economy at full employment next year

Vital Statistics:


  Last Change
S&P futures 3897 16.3
Oil (WTI) 57.43 0.54
10 year government bond yield   1.18%
30 year fixed rate mortgage   2.85%

Stocks are higher this morning on no real news. Bonds and MBS are down.


The upcoming week is relatively data-light, with inflation data as the only potential market-moving numbers.


Janet Yellen said that if Congress passes the stimulus bill, the economy will return to full employment by 2022. “There’s absolutely no reason why we should suffer through a long slow recovery,” Yellen said during an interview on CNN’s “State of the Union.” “I would expect that if this package is passed that we would get back to full employment next year.” These comments have bond yields rising. The Fed’s December projection has unemployment falling to 4.2%, so I guess you could call that full employment.

FWIW, I guess this is conceivable, but something like one third of small businesses have failed during this pandemic. I don’t know that we have seen anything like that since the Great Depression, and I suspect it will take longer than a year or two to repair that damage. Most of these small business failures were retail, bars and restaurants. Their failures are then transmitted upwards to their commercial real estate landlords. But, remember Yellen is no longer a civilian, she is part of the Biden Administration, so she is talking her political book. It is part of the job description, and you should take her pronouncements with a grain of salt.


The pandemic has hit the hotel sector hard, so hard that many buildings can be bought at deep discounts and then re-purposed into affordable housing. “Apartments around here, you might pay $120,000 a door, and we can purchase these hotels probably $30,000 to $40,000 a door, and maybe put $10,000 a door into the renovations.”

Democrats are mulling a $15,000 tax credit for first time homebuyers in an attempt to mitigate the affordability crisis caused by soaring home values. The fly in the ointment is the left wants to raise the tax rate on long-term capital gains. Since Democrats are going to use the reconciliation process to push through the stimulus bill (thus passing it without Republican votes) it might not matter, but it also does not allow for any D defections.

Ultimately the issue in the housing market is one of supply, not demand. Adding a tax credit will probably just push prices higher. More homebuilding is the need, not housing subsidies. But that is a harder issue since zoning is a local issue, and there are major internecine wars there with the Democrats. Building in the suburbs will be easier, but single family builders are still struggling with high input prices (lumber especially) and a shortage of skilled construction labor.


Merger mania in the mortgage space. Guaranteed Rate just bought Owning Corp, a direct-to-consumer lender in California. Note that Guaranteed Rate just bought Stearns lending as well, so the big players are bulking up for what might be the mother of all price wars down the line.


4 Responses

  1. The feminisation of congress is complete.


    • It’s a progressivization of congress. Republicans all get the same kind of death threats. How many do you think Marjorie Taylor Green has gotten so far? Do they get to say they are getting those death threats “just for existing”? Hell no they don’t. THEY are getting those “free speech truth bombs” because they are Nazis or believe crazy conspiracy theories.

      Just more of the double-standard and trying to pathologize conservatives and anybody or anything right of center rather than honestly acknowledge that being in the public eye gets you death threats, and that there is a fringe group of people who subscribe to all sorts of ideologies that think death threats are productive or reasonable responses to things they don’t like and sometimes to things they just imagine. It’s part of a narrative of “oh woe is me, this only happens to innocent women of color like myself, not to everybody who gets into the public eye in congress”. AOC gets death threats but so has Diane Feinstein and Nancy Pelosi and Marjorie Taylor Greene and Sarah Palin and Ted Cruz and Kevin McCarthy (from both the “left” and the “right”) and so on.

      They don’t get these threats because “they exist”, they get these threats because they are in the public eye and in a population of 350 million you’re going to have some mentally unbalance and kind of stupid people.


  2. Heh:

    The CDC has issued a reminder that just because people get the vaccine, that doesn’t mean they should go outside, experience human interaction, or have any kind of joy or happiness in their lives ever again.

    “We noticed people were getting the vaccine and then just assuming because vaccines are designed to make people immune to viruses that they are immune to the virus. Then, they were doing crazy things like going outside, interacting with other people, and being happy,” said a CDC spokesperson. “And all of this because doctors and scientists kept pushing the vaccine as though it were a cure-all solution that would make you immune to the virus. Well, that view is now considered anti-SCIENCE. And if you disagree with SCIENCE, you are literally murdering grandma. Literally. Like with a baseball bat.”


Be kind, show respect, and all will be right with the world.

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