Legendary economist Dr. Lacy Hunt, EVP and Chief Economist of Hoisington Investment Management Company, joins Julia La Roche on episode 192 for a wide-ranging discussion on the deteriorating economy.

In this episode, Dr. Hunt explains that non-farm payrolls overshot by five standard errors, making it the worst miss since a 9 standard one for 2009, during the GFC recession, and marking another bureaucratic failure. According to Dr. Hunt, the reported overshoot of 818,000 was based on an internal seasonally adjusted series, but based on the nonseasonal adjusted data, the overshoot was actually 915,000. Dr. Hunt explains that the non-farm job miss means that productivity will be revised up while unit labor costs will be revised down. Personal income and Gross Domestic Income will be revised downward, and the personal saving rate will be reduced from its already very depressed level of 3.5%.

✨ This episode is sponsored by Public.com ✨

Paid endorsement for Public Investing, Inc. Not investment advice. All investing involves the risk of loss, including loss of principal. Brokerage services for US Listed and registered securities, options and Bonds in a self-directed brokerage account are offered by Public Investing. ETFs, options and Bonds are available to US members only.

*A Bond Account is a self-directed brokerage account with Public Investing, member FINRA/SIPC. Deposits into this account are used to purchase 10 fractional investment-grade and high-yield bonds. The 6.9% yield is the average annualized yield to maturity (YTM) across all ten bonds in the Bond Account, before fees, as of 8/23/2024. A bond’s yield is a function of its market price, which can fluctuate, and a bond’s YTM is “locked in” when the bond is purchased. Your yield at time of purchase may be different from the yield shown here. The “locked in” YTM is not guaranteed; you may receive less than the YTM of the bonds in the Bond Account if you sell any of the bonds before maturity, or if the issuer calls or defaults on the bond. While corporate bond yields should fall in reaction to a Federal Reserve rate cut, we cannot know whether that will be true of the bonds in the Bond Account, how quickly bond yields will respond, or how much they will decline. Public Investing charges a markup on each bond trade. Bond Accounts are not recommendations of individual bonds or default allocations. The bonds in the Bond Account have not been selected based on your needs or risk profile. Fractional Bonds also carry risks including liquidity risk, interest rate risk, credit risk, inflation risk, and potential tax liabilities. Read more about the risks associated with fixed income and fractional bonds and learn more about the Bond Account at https://public.com/disclosures/bond-account.

✨ Lock in your 6.9% yield: https://public.com/julia ✨

Timestamps:

0:00 Welcome Dr. Lacy Hunt

1:16 Macro picture

3:37 Downward revision in non-farm payrolls is significant

5:45 The 818,000 error is actually 915,000, according to Dr. Hunt's model

9:00 The economy is deteriorating

15:24 Net national saving shows we have a problem

21:40 The seriousness of negative net national savings

25:00 Decline in the standard of living

34:50 Possible solutions, shared sacrifice

40:00 Fiscal dominance is a very real possibility

45:40 Fed is behind the curve

47:37 Where are we in the economic lifecycle

49:44 The global economy