Data right now Barclays Says yes, the economist joins us to make the case. We are at historic lows and housing inventory, why thats pushing home prices down and rents down and how that will impact inflation reits and households well get to that. First, lets get a check on the markets. There is differentiation and the outperformance is coming in the blue chip Dow Jones Industrial average. Its been an underperformer with the broader s p and the nasdaq composite, todays trade has a lot of those kind of valueoriented type stocks one in the blue chip index and the dow is up 250 points and 1 higher and four companies are making the bulk of those gains and its United Health and amgen and also mcdonalds and boeing so if you take a look at some of those stocks and thats whats powering the dow and up about 30 points and right near session highs and we were up 32 points and up about 13 at the low and a positive day twothirds of 1 gain so far the nasdaq composite is an underperformer and reversion playing out and for the composite 13,945 and up 0. 25 . One reason why is because the second worst performing sector in the s p 500 over the last week has been technology its the biggest weighting in the s p. Apple, among the own megacap tech names following on the Downside Momentum tied to its Earnings Report last week, down 2 right now alphabet, amazon and nvidia bucking the trend more last week and to the upside so far, notable 2. 5 for alphabet and the stock of the day, one of the worst performers in the broader s p 500 has been and still is tyson foods which is down 6 and by the way, thats near the best levels of the day. Its for its Earnings Report and the meat processor comes out with earnings and revenues that both are shy of expect eggs and the shutting down more chicken processing plants and they are facing headwinds on beef, pork and chicken and it is not selling well with some investors and tyson is off, and well see how tyson foods shakes out ill send things back over to you. Dom, thank you. Dom chu. Now that its widely expected that fed is done with rate hikes be the next key question is when will they pivot. New york fed president John Williams says they may start cutting rates next year if inflation keeps coming down, warning if they dont, real rates will keep rising and thats a problem joining me is larry lindsay, president and ceo of the Lindsay Group and president of the Economic Council under george w. Bush and along with cnbc economics reporter steve liesman. Welcome to you both. I feel like youre not the guy who would be rooting for rate cuts at this point, but you know about real rates and how restrictive were getting up to 2009 levels here i certainly dont think well be cutting this year and theyre more likely to increase this year, and if hes correct like he says is if inflation comes down next year the fed will cut. Im not as optimistic as he is about inflation coming down and obviously, if it does they will cut rates. What do you think about inflation coming down. Were about to get the cpi report later this week and if we back up from what youre talking about and say the fed funds rate is ill just round to 5. 5, and the inflation rate has to be 3. 5 and do you think thats where we will be this Time Next Year i think the answer is we will see, but the most important thing thats happening in the economy is the solid wage increases, they are going to continue the earlier story mentioned that theyre probably going to become more widespread. We now have sort of the standard 5 or higher contract settlement usually thats front loaded which means youre going to have more pressures in the short run. The other thing that i think is important is that no matter what the fed does, the long end of the curve is going to continue to rise in rates by the end of 2024, i would imagine the inversion will be over, maybe well before then, and were going to see the longer rates up in the 5 area and that means that money be hard to come by and all money will be more expensive thats obviously the argument that he thinks the 30year is going to 5. 5 . Theres this splat bit between people that that will normalize like they did a couple of decades ago and some that think we could go back to more like a 2010. Yeah. Theres an idea out there that the fed will be not going back to zero. I think there are people that would applaud the fed going back to zero, and i think theres an idea that the curve is going to uninvert what is the right way . Revert someone give me thor e verb, an actually go back to the long end that will lie in any event, but i just want to be clear about what williams is saying because the fed looks at things in a different way, and i think larry knows it they look at real rates. What if i told you that the plan cuts its nominal rate and theres a way to measure it that real rates actually increase what im showing you there now is if you think that based on their projection for pce next year versus the projection for the nominal rate this year or next year, it goes down by 0. 3 while they cut 100 basis points. Notice 2. 4 this year, 2. 1 next year and that is relative to what they believe the long run rate should be this is the real question and people think what is the kind of normal they think it should only behalf a percent. A half a point above the inflation rate we are way above that right now. They are restrictive in their mind, okay larry may have a right to use there, but let me just point out that if you use their headline pce number, um sore their core pce number they get more relative to the next year. Its wrop of those things that i always wond, you can feel fool some of the people some of the sometimes and thats cudding and in theeds mind, you have to have that kfrgd. Thats one of the reasons why you all cut and the labor market was used the way it is, then i think that in fact, Inflation Numbers are likely to go up. In other words, larry, you would take cuts off the table and not philosophically, but just practically you dont think the inflation is coming down that much next year . Thats correct, and i think were going to see a little more upward pressure. Weve already seen a turn in commodity prices, oil, a small part of the total inflation and it works through the system and again and labor, labor, labor. There is no real softness as far as Wage Negotiations go. The unemployment report is the unemployment report that isnt getting a lot of mention is that we are now above where we were in 2019 in terms of participation by individuals, and not that theres anything wrong with people my age, but thats where the growth in Effective Labor supply has to be and we are fully employed now. Theres a lot of interesting stuff that will happen can you write august 23rd in your calendar . It may be the most important employment report that is not in anybodys calendar right there thats when the government will announce the benchmark revisions for the year ending in march 1, okay and with that, its potentially going to show if there are maybe fewer jobs out there now write down january january is going to tell us how many more people are or are not in existence in the United States okay the last two years, a Million People showed up each january and not sure where they were hanging out that showed up to be counted and what is going on right now, and i can say from some experience on this, kelly, the Federal Reserve is piloting the u. S. Economy in a very thick fog when it comes to jobs. I have piloted a boat, it is very difficult to do you find yourself off course you think youre a mile from the. Y rock, and you may be a couple of yards from the rock let me add to the fog speaking of gauging the labor market one of the Big Questions out there is whether fridays jobs report which came in at 147,000 jobs last month, should we rely on that report as much as usual or is the public and the nerve misplacing that trust especially after recent changes, barclays notes that would be made to the private adp payroll survey, that it is a better gauge of the job market and that report said the u. S. Added almost 20 he is head of Economic Research at barclays jonathan, youre going out on a limb here, giving adp this much credit. Yeah. I think historically weve always looked at the adp report that comes out before the payroll report and we look at the number and see how it squares up and then we throw it away, but the revisions that theyve made for their approach are pretty meaningful. Effectively what theyve made and the report is an alternative measure of employment and in fact, when you dig in to the details of the adp information, their survey is actually comparable in terms of the size to the bls establishment survey. They actually have a lot of features in the survey that are very good in terms of measurements they probably do a better job among other things of taking care of first and establishment which is a big reason why we get the type of benchmark revisions that steve was talking about a moment ago in addition to that, there are no missing respondents and it has the coverage of smaller firms and so forth so there are a lot of things to like about that measure and we think that we should be giving it some weight i would like to get a response from steve and larry. Steve, to you. There is a revelation going on in our ability to understand our economy through High Frequency data if we let it. Its not a given and its not going to happen if we dont make it happen, but when i was instrumental in bringing adp to cnbc more than a decade ago its because i was one of the people and there were many of us, who saw the possibility of using highfrequency data and private sector data to enhance and sometimes better what the government is doing. Now, adp has problems and its going to take time to i think, tweak it, but what theyre doing now is what they should have been doing all along. Not try to model the confusion thats put in, for good reason by the bls, but just tell us what your number is. Totally understand the need for seasonal adjustment, but this is early days and this is just like ford just came out with this car, the engine works and the weal spins and were not sure, but it will create a ref laugz it will be a slow process, but akp is doing it the reit thing i applaud him for being contrarian. People have been dismissing it with the broad data coming out. Larry, to you you say they dismiss it because it isnt the labor department. Just tell us what the number is. I have a followupto my idea the more data the better. We all know there are problems with adp and we all know there are problems with bls. To their credit, the fed also selects a lot of anecdotal information to their local board of directors, for example, and im sure they dont disregard that. I was just going to follow up, kelly that the market never trades on the trug of jobs if you think about it, they come out with a number and say the number is 2 hun,000 and the market sells off because its weak two months later, or a month later its revised to the consensus number when did the market have the trade that it had . Totally i think getting more contemporaneous data is a step in the right direction although jonathan can underline the point, larry, and jonathan, if you think this is a point towards the benchmark provision than we expected for the Government Support and to larrys point, just how much more point there is into the wage next year and whether that does leave the fed room or acquire them to cut or not all of these are pretty hard to measure in real time. I think the benchmark revision, i mean, if you look at some of the early estimates from the qcs, and what the bls has used to do this benchmarking, they suggest at this point that there may be downward revisions. Theres something that is perhaps not understood by Market Participants is when you see the data themselves revised quite a bit. Oh, my goodness were talking about wage data. It creates the benchmark, would it revise you as they revised themselves, jonathan yeah. We see it in the Fourth Quarter of this year and there is a systematic pat everyone of upward revision of qcw in recent years and its something to watch for. So we cant really bank on revisions along the lines that would be suggested by Fourth Quarter. Can i be a mice to the statisticians. There is 150 Million People. By change of a couple thousand. By change of a couple thousand, yeah theyre trying to thread the needle every month every month i think they get it right. More or less, theres a big issue this morning in preparation for this panel here, when you have a lot of quits its possible that were double counting jobs because if the quit ratio is high then a lot of churn may not have fallen off one payroll for another. Thats a possibility meanwhile, if you look at the trajectory of job growth, the the population i believe were supposed to be 75 to 100,000 we are routinely doing 100,000 more than we should be doing where are these bodies coming from are they ghosts in the machine you might want to quote a police dog or a famous phrase that goes back are these guys ghosting the machine . Where are they coming from and by the way, if this has been happening while the Unemployment Rate has been steady, then maybe the population growth is higher and maybe the fed is wrong and the job market is not that tight. Larry put a point on this one. Well give you the last word i think that whats important here is what actually happens to wages as opposed to employment because that is the drive for inflation and im just watching wage settlements im also watching what is the political necessity for Union Leadership they have to deliver now they havent delivered for a long time. If they dont deliver now theyll be increasing questions among workers about why bother with the union so i think were going to seea very aggressive Union Movement and continued upward pressure on wage rates. Im, like, there are only a small portion of the workforce how much macro impact does that have barry knapp brought it, disemvert. Thank you, larry. Ive been searching for that word, too. And thank you along with our own steve liesman. Still ahead, Home Affordability is nearing a four decade low and thats just this morning and with rents starting to fall could there be a new shift a new spin on the age old debate of stocks versus bonds and the etf neck and neck with the etf up in may and now theres a 20point difference between the two. As we head to break, heres a quick look at markets and the russell has turned green and its unchanged and its lagging as the nasdaq is up a quarter of a percent over 4500 today and the dow is up 1 led by those four companies dom mentioned and the tenyear, 4. 086. We are back after this this is the exchange on cnbc nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes thats what im talking about. [ cheers ] running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Welcome back the dow is up 1 today and check off shares of amazon which is off 2 after reuters is reporting they are set to move with the ftc next week ahead of the potential antitrust lawsuit and that has investors encouraged about prospects and amazon shares moving toward session highs or definitely session highs. Turning to housing, home prices also continuing to rise and that, plus high rates is pushing Home Affordability to a 38year low as of this morning according to black knight and its the opposite story in rentals where a glut of apartment and rental homes have now pushed their vacancies to 2021 and theyve fallen to prepandemic levels to 1 to 3 according to data company costar. Lets bring in andy walton, thanks good to see you. Good to see you, too. Im trying to think of this unusual it feels to me like markets are markets and if rents are that much cheaper than homes then people will flood into the rental market at some point, but maybe they wont because a lot of the millennial cohort are looking at the lifestyle change to life in the suburb and the yard and all of that. There are no good options out there. Home affordability at of this morning is at a 38year low. And rent prices tend to trail home prices and theyre slowing down a little bit and you are seeing unaffordable rents out there in the market and regardless of where you look, shelter costs are simply expensive. They are expensive now and its pretty clear that while home prices might still be even higher, rents might seem to be a better deal. When you look at rental growth, it tends to trail home price growth out in the market and what youre seeing in terms of rent prices is when weve seen in the Housing Market over the last 18 months and weve seen the home price go to 20 down to effectively zero in may and weve seen the rent follow the same path and whats interesting in june is that youve seen an inflexion in the Housing Market start to heat back up and thats our expectation is you look over the next few months were at 0 last month and we expect 2 home growth, and maybe three by the following month and youll see that reaccelerated into the fall. You think 3 year on year yeah. Wow we talked last time and it was interesting how youed in 22 we saw a reset in markets like san diego, but not all markets so where are we now nationwide where are these price hikes coming from and are they kind of coming from everywhere at this points its a little bit of everywhere its not proportionate everywhere, but 60 of markets are up and when you look at kind of where its taking place, and if you just look at june month on month and seasonally adjusted and the strongest gains are in the northeast and the midwest and theyre strong and they have low inventory and relative affordability and those are the markets that have been hot and have stayed healthy. Whats interesting about june is the western part of the u. S. So your san joses have seen some of the markets drop have turned a corner and are number two and number three in terms of price g