Transcription
Here's our economic update for November 6, 2025.
The Fed had their Federal Open Market Committee on October 29th. They cut the interest rate by 25 basis points or 0.25%. Basically, we're at 3 and a/4 to 4%. The reason for this is well, even though the economy is expanding at a moderate pace, we're now at about plus 3.9. It just got revised up to plus 4% on GDP now, and approximately about 1 to 1.3% is directly from AI. There are other things that are impacting that. Just when you're building data centers, there's a lot more work in construction and and uh things like that. Job gains have slowed and unemployment has edged up a bit. We're now at 4.3%, and that was on September 5th, the last time we actually got government data out of that.
Inflation has also moved up and it's remaining elevated. We're currently at 3.0% in our CPI, and that was on October 24th. So, this is a bit of a problem because the Fed wants to see maximum employment and it wants to see stable prices. Its target is 2% inflation, and it doesn't want to see unemployment creeping up. Basically, to battle inflation, you would increase your interest rate. And to battle unemployment, you would have quantitative easing and you would start to reduce your interest rate. So, they're seeing that the job market is slowing and unemployment is more of a risk. So, that's why they're starting to cut interest rates.
Now, I don't have official government data, but what we do have at the moment is ADP job numbers, and they're fairly similar. So, for jobs on November 5th, we got the October jobs report. You always look the month prior. So, we got plus 42,000. So, everybody's happy, right? We have 42,000 additional jobs. The thing I always question is, how many jobs do we actually need? And if you want to figure that out, you have to figure out what's the US population. We're at 342 million. The population growth rate is approximately 0.8% if you look over the past several years. If you multiply those numbers together, you get about an additional 2.7 million people per year, or about 228,000 people per month. So, how many people actually work? Well, about 62.3% of the population is working. So, if you're adding about 228,000 people per month, multiply by the 62.3%, you end up with about 142,000 jobs are needed per month, not to see the unemployment rate go up. So, when we see plus 42,000 this month, last month was we lost 32,000, we gained 22,000, gained 73,000, lost 13,000, gained 19,000. When you average this out, this comes out to about 18 and a half thousand jobs per month. That's falling way short of what we need to not have unemployment creep up. So even though we have jobs being created, it's not fast enough to keep up with population growth.
So where are the jobs being lost? Well, in the past month, small and mid-size companies lost about 32,000 jobs, whereas large companies actually gained 74,000 jobs. We're also seeing that there's an increase of about 65% this year compared to last year, this same, you know, year-to-date time in terms of layoffs. Where are a lot of these layoffs occurring? Well, they're in information like IT services, business, uh, professional and business services. Where are we gaining jobs at least over the past month? Well, it was in trade, transport, utilities, education, and healthcare.
Interest rates. So, some impacts here. So on October 24th, the US credit rating was downgraded yet again. This time by Scope, the European Credit Agency. We went from a double A to a double A minus and considered stable. Part of the reason for this is we have over 120% debt to GDP ratio. We have 38 trillion in national debt. So with that being said, could that be a problem? Well, right now they don't want to renew the debt for a long-term period. They want to have it at short terms because the interest rates higher than it could be and if it's falling, they want to renew the debt at lower interest rates for a longer period of time. Now, the problem is such as about 800 years of data, this time is different. This is the next book I'm reading. Uh, effectively throughout history when countries look at having short-term debt if there is a shock to the system and people no longer have basically faith in that government's ability to repay the debt, such as, you know, people start downgrading that debt, seeing it as more risk, what happens is if people are unwilling to basically finance that debt, then those countries could default. It's less likely with the United States still having a reserve currency, but if that, you know, goes away at some point, it becomes more of a risk. The other thing is that the US debt is denominated in US dollars. So, the US can effectively print more money and it's less of a risk. This becomes more of a risk if you were in like the Weimar Germany or whatever where you have money that's basically in other foreign currencies and then you have to pay it back, but then your money becomes less valuable and then you're paying back a more valuable currency that becomes more of an issue.
Latest updates for the Fed funds rate was November 3rd. It says it's 4.09%. The Fed's fund rate, like I said, is coming down to 3.75 to 4%. So, this isn't that far off, but I would think that it's somewhere between those two numbers. And this only impacts the short-term lending. This does not impact like the 10-year or 30-year mortgages or or things like that. Uh, so this is going to drop and this usually drops just prior to a recession to help stimulate spending to help stimulate uh basically job growth.
So when you see something like November 5th, we have the 10 minus 2-year Treasury. We're now at 0.54%. Generally, if you look back, the gray areas are where we hit recessions. You usually have an inversion and then that's followed by a steep rise and once it gets to above about 0.5%, then you start having issues where you go into job losses, layoffs, um, you know, you start going into either potentially stagflation or a recession or an economic slowdown of some sort. So why is this 10 minus 2 increasing all of a sudden? Well, you have the short end affected by the Fed funds rate. So, that's dropping because they're trying to stimulate the economy because people are losing their jobs and the unemployment rate is going up. On the other end, you have the 10-year and that's going up because there's just overall increased risks and this is more set by the market. So, if you're seeing credit downgrades, that's seen as a risk.
If you look at the US Supreme Court, they're figuring out whether or not the tariffs can go through and then that's going to impact how much in terms of taxes the US will collect or in tariffs. So that may affect that. The other thing that's going on is October 1st, the US government shutdown. We are now beyond 37 days of shutdown. We now hit the longest shutdown ever. And there's no more economic data. There's no jobs or spending or anything. So, we have to rely on data that's not from the government. So, the Fed is trying to make decisions and basically they're blindfolded. So, they can go by ADP and other uh independent sources for information, but it's not the official government information at the moment.
The last government shutdown was stopped basically because of the air traffic controllers calling out sick and we're starting to see some issues with this again. So, we have not been paying the air traffic controllers at our airports and same with the TSAs. So, basically, you're going to start to notice very long lines at airports. And this Friday, they're actually going to start reducing the amount of flights in and out of over 40 airports. And they're going to start uh cancelling up to 10% of all the air traffic because basically they don't have enough air traffic controllers and TSA agents. They're all basically calling out sick and going somewhere else and getting paid for some other work. Most likely the FAA is basically saying they're reaching a breaking point. Uh, this is uh, I I would not want to be someone traveling during this period of time. So they said that the flights that are domestic flights are more likely to be cancelled. International flights are less likely to be cancelled. Uh, in fact, none of the international flights at the moment are impacted.
There's some ongoing work with SNAP, so supplemental nutritional assistance program or other people know as food stamps. There was about 42 million people on food stamps at the moment and about 5 million did not receive any benefits in November and the WIC is a separate thing. So, but these things are starting to run out of funds and the federal government that basically a federal judge said that the US Department of Agriculture had to use some of its contingency money to help pay for the food stamps and it's only paid for about half the amount that it should be paying. So, now there's some back and forth with if it has to pay the remaining contingency money that they have. So they may run out of all their contingency if they continue doing this.
In order to stop a shutdown and basically fund the government, you need 60 senators to vote and pass this. Now, neither party has enough to pass it on their own. So they need to agree on some things and that's not happening. So on one side, uh, the Republicans have voted yes to fund. Uh, they're thinking about ending the filibuster, which requires the 60 votes. And if they do get rid of the filibuster, if they do that, they have about, I think it's like 53 votes and they could easily pass this without any help from um Democrat senators. If they do that, the negative is then the next time around there's no filibuster, so whoever has simple majority wins. And generally when you have uh, you know, not a presidential election, you have a midterm election, it usually swaps. So then the Republicans potentially then won't be in power during the uh, the next vote. The reason why the Democrats are voting against this is because they're holding out and they're trying to negotiate for adding back in some of the healthcare subsidies for the Affordable Care Act. Uh, basically premiums are increasing for those that are on the lower end of the income uh brackets and without the subsidies, it'll be difficult for them to actually purchase health insurance. So that's why they're holding out for that. Uh, Republicans are saying that they will talk about it as a separate issue, but not during this, so pass this and then they'll talk later. I understand from negotiations, if you give up all your leverage, I I don't really see why the other side would have to do anything. Um, especially if you're the minority in the house. So I get both sides.
Inflation October 24th, we have our consumer price index of 3.0%. That's gone up slightly. Consumer price index core came down just slightly to 3.0%. Uh, that's just excluding food and energy. If you look at your Social Security cost of living adjustment, this is going to be 2.8% and that those first checks will come out at the very end of December just because January 1st is a holiday. And this is just taking the average of the last uh 3 months. So September, August, and July.
How's the consumer doing? October 24th, index of consumer sentiment. We're down 2.7% month-over-month, minus 24% year-over-year. Current economic conditions down 3% month-over-month, down 9.7% year-over-year. Index consumer expectations down 2.7% month-over-month, minus 32% uh year-over-year. So, what's going on? So, overall, the economy, they're saying it's more like K-shaped. So basically top earners are doing very well, but the bottom, say 90%, are not doing as well because inflation is starting to eat away at their earnings as well as layoffs and and jobs are becoming hard to come by. So the top 10% of earners currently drive about 50% of all spending in the economy, and the other 90% of the population only makes up for about 50%. So top 10% doing very well, bottom 90% uh not as good.
Real estate. So, homes October 23rd, existing home supply is at 4.6 months. This is up uh 4 months over the year. And median sales price is now at $415,200. And that's up uh 2.1% year-over-year. The reason I don't have this in green or red is it really depends. Are you a buyer or are you a seller? Um, prices going up are good for home sellers, but not necessarily for home buyers. And and if you have 4.6 months, more supply gets to more balanced market. So it's not completely a seller's market. It's moving towards a buyer market. But basically a balance is when you hit about 6 months supply. We're not quite there yet. So it's still a bit of a seller's market.
October 30th, 30-year mortgage is at 6.17%. That's come down quite a bit. And just realize that if you're trying to hold out for a low interest rate, uh, caution you a bit. Now, real estate is local. If you look up here, you can see that different regions have done better or worse over the past year. But generally speaking, if you have a 1% drop in the interest rate, that allows for about a 10% increase in what you can buy, but also everybody that's competing against you. So that means generally when you drop interest rates, real estate prices go up.
On October 16th, we had the CEO survey. 38% of CEOs think that the economic conditions will worsen in the next 6 months, and 24% expect them to get better. 32% plan to increase their workforce over the next 12 months, which is a good sign, and 29% plan to decrease their workforce. The majority, 64%, expect an economic slowdown with increased inflation. This would be considered stagflation over the next 12 to 18 months. So, this is kind of tying back into what the Fed also thinks. And uh, I think everybody's kind of feeling this at the moment in terms of jobs not being as available. CEO confidence is slightly negative and about 81% expect more than half of the jobs will be changed by AI within the next 5 years.
Whenever I talk about economic slowdowns, recessions, or anything like that, do note I said this about 12 months ago. I said this was a slow-moving train. I warned at the very end of 2024 and I said it would take about 12 to 18 months to actually see something develop. And if you look back to first quarter of uh 2025, we had negative GDP. Second quarter, we did rebound. Third quarter, it looks like we rebounded as well. We had a slowdown first quarter, but it looks like we may be slowing down in the near future. Uh, the only thing that's really keeping us afloat, I think, is AI infrastructure, AI spending, investment, that sort of thing. And you'll also find that Nvidia and a lot of the companies that have AI are buying from Nvidia. Nvidia is spending money on those companies and then those companies are spending money back on Nvidia and other uh, basically chip manufacturers. So it's a bit circular in those areas.
If we do hit an economic slowdown or recession, don't panic. And these are pretty common. They happen every six or so years on average. Maybe more recently, not so uh often, but they're usually about once every six years. They last on average about 10 to 11 months and they've gone in recent history 6 to 15% unemployment. If you exclude 2020, which was not very typical at 2 months and had that 15% unemployment, they're typically in this 6 to 10% unemployment rate. And if you think about that on the other side, about 90% of people are employed. Now, the other thing that you'll notice during these times is that the 27-week unemployment rate starts to go up pretty rapidly and it peaks around just above 40% if you look back through the last couple of recessions. We're currently at about 25.7% unemployment rate for longer than 27 weeks. So, people that have been unemployed and can't find a job for at least 6 months or more. So going back to it becomes hard to find a job. So that's really where the Fed is coming in where job gains have slowed, unemployment's edged up. It's harder to find a job. We're seeing long-term unemployment going up. So that's not something we want to see.
So with that, what do you do in these types of situations? Well, it's best to prepare and not wait for something to happen. What I would suggest is if you don't have anything, start saving up an emergency fund. Whatever you can scrounge together. If you can work extra hours or pick up a side hustle a bit, uh, just start putting money aside. You know, a thousand bucks is a lot better than zero and a month is better than zero and and any amount is better than nothing. So, you don't have to start with 6 months, but start saving something. You know, there's always a rainy day, car breaks down, you need a break, you blow a tire, something happens. So, it's good to have uh that emergency fund. And if there's medical bills or anything like that, it's also good.
For any money I need in the next 5 years, I put that money into high yield savings, uh, high yield CDs. All of these are FDIC up to $250,000 per uh, account type. Any money I need in the next year or so, like if I'm buying a house or uh, I have some big expense that's coming up, uh, I don't want to put that in the stock market. I'm going to put that in the CDs and uh high yield savings, that sort of thing. So any money I don't need in the next five years, I'm using dollar cost averaging. I'm taking the emotion out of this. I'm just buying it every time I get paid. About 80% goes into the S&P 500, 10% goes into the total international stocks, uh, and then about 10% into bonds at the moment. Reason I'm buying bonds is that when interest rates drop, uh, bond value goes up. The the bond rate is the same. It's matching kind of the interest rate, but in order for that to happen, the bond value has to go up when interest rates go down. I put a video up on this on the channel if you want to watch that in more detail. That's why I'm starting to get more of the bonds as interest rates drop.
I'm not currently buying gold, silver, copper, aluminum, things like that. But I have more than $100,000 in those assets already. Gold I bought at $1,400 an ounce. Silver was about $15 an ounce. Uh, copper was like 80 cents when I got hundreds of pounds of that. Uh, I made body armor back in the day just for fun. And uh, aluminum I just kind of scrapped that, melted down into ingots. So I I have that, but I'm not buying it at the moment.
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