The biggest thing everybody is looking at right now is the rate of inflation and the federal funds rate, as long as inflation isn’t coming down rates aren’t coming down. This may take some time, I see some speculate that rates will be coming down in 2023 but I’m skeptical that inflation will be that easy to tame.

My guess is that we’ll have “high” interest rates for at least a couple of years and then maybe, just maybe, they go down a little. But then again why would the fed decrease rates unless they broke something and we’re in a deep recession?

Federal funds rate

Since the Great Financial Crisis we were at historically low interest rates, it’s time to normalize.

Unemployment rate is at a historic low which means the average consumer is financially healthy and can still spend, the fed needs unemployment to go higher if they were to succeed in taming inflation. People out of work will always spend less.

Unemployment rate

If the fed will causes a recession in 2023 (like most anticipate) we’ll definitely see this number go up as it did historically during recessions.

We should also look to alternate sources of data and just the official numbers. Here’s the unemployment rate from ShadowStats.

Labor force participation rate hasn’t returned to pre-pandemic numbers. People are staying at home instead of going to work. Maybe their balance sheets are still strong from the pandemic or maybe some of them are part of the creator economy.

Labor Force Participation Rate

We are seeing job openings finally starting to come down but they are really high historically, it seems as if people just don’t want to work.

Job Openings, non-farm

For now the fed is causing pain to those looking for a new mortgage. Mortgage rates are over 7%, last seen at 2002. Look for growth of housing prices to moderate and sales to come down. Not sure how this will affect the rent price but people will definitely rent for longer.

30-Year Fixed Rate Mortgage Average