The U.S. unemployment rate rose to 3.7 percent in October, and industry data suggest that such job trends will continue, with companies like Twitter, Amazon, and FedEx laying off thousands of workers.
This will result in unemployment almost doubling to “six-and-a-half percent,” while the ensuing recession will last until 2024, said Alfonso Peccatiello, Author and CEO of the Macro Compass.
“I think six-and-a-half percent [unemployment] is totally doable in the U.S.,” he said. “That’s three full percentage points by 2023.”
Peccatiello suggested that as GDP hits a trough in “the third quarter of next year,” assets will become underpriced and there could be good investment opportunities.
“That’s the point where you want to load up,” he said. “The Fed at that point will have pivoted, but people won’t want to buy stuff because they’re losing their job.”
Peccatiello spoke with David Lin, Anchor and Producer at Kitco News.
Housing and Unemployment
House prices have fallen across the United States, and as both sellers and buyers dwindle, this will feed into unemployment, said Peccatiello.
“The housing market represents, in the U.S., 15 to 18 percent… of GDP and roughly 12 to 15 percent of the workforce” he explained. “There are roughly 12 million jobs related to the real estate market, and the real estate market is completely frozen, and it’s going to be much worse.”
Supporting his claim with data, Peccatiello noted that “housing sales are down 70 percent,” because of higher mortgage rates implying less incentive for buyers to pay costly monthly payments.
“Mortgage rates are at 7 percent, not 3 percent anymore, in the U.S.,” he said. “The median mortgage installment payment was $2,000 to buy the median house in the U.S., and it’s now $3,500. So [the buyer] is priced out.”
However, he added that sellers are reluctant to offer their homes for sale at low prices.
“As long as the labor market is strong, [the seller] is not going to sell his second house, his B&B, or his buy-to-let house,” he said. “He’s just going to keep it there… that slows sales activity.”
Bonds
Some analysts claim that despite rising inflation, investors are keeping cash in anticipation of lower asset prices. Peccatiello suggested an alternate explanation, that investors are attracted to bonds paying a high yield. He said that assets like real estate are a “folding knife” of falling prices.
“If you buy a T-bill [Treasury Bill] in the U.S…. you get four-and-a-half percent yield,” he stated. “That’s a pretty decent risk-free return for six months compared to locking your money into a house, and all the costs associated with it.”
To find out Peccatiello’s Bitcoin price target, watch the video above
Follow David Lin on Twitter: @davidlin_TV
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