First Friday: The Government Shuts Down -- But Bitcoin is at an All-Time High?!?

0:00There is no jobs report today. This is the first time I have ever opened a First Friday episode with those words. But not to worry because we have jobs predictions, we have inflation data, we have private payroll data, we have a Fed rate cut, plus a strong potential for two more on the way. We have Bitcoin and gold both hitting new highs. And on the topic of new highs, we also have the distinct possibility that the full retirement age of Social Security might be going up. There's a ton to talk about today. Welcome to the first Friday episode of the Afford Anything podcast. This is a show that knows you can afford anything, not everything.

0:36We cover five pillars, financial psychology, increasing your income, investing, real estate, and entrepreneurship. It's double I fire. Normally on our Tuesday episodes, we typically answer questions from you. And on our Friday episodes, we typically interview a guest, but there's one exception. And that's the first Friday of every month in which we zoom out and take a macro look at the economy. So welcome to the October 2025 First Friday Economic Update. As of 10.45 a.m. Eastern, the government is still shut down. This means that the jobs report, which is typically published by the Bureau of Labor Statistics at 8.30 a.m.

1:16on the first Friday of every month, is not out yet. Which is, well, I hate to use the word unprecedented, but at least as long as I've been doing this, it is. But we do have data from the ADP report, which is a private payroll processor, and they reported that we lost 32 ,000 jobs in September. Now, I'm going to take a moment to describe the difference between the BLS report and the ADP report, and after that we'll go into some of the details of the ADP report and what implications this might carry. The Bureau of Labor Statistics, the BLS, which is part of the Labor Department, they survey a representative sample of a variety of industries.

1:58And when I say representative sample, I'm talking about a data set that is compiled based on geography, industry, and size of company. So they assemble a data set that looks across a deliberately compiled representative sample representing over 600 ,000 individual work sites. They ask those businesses to report monthly data on the number of employees on their payroll as of the 12th of the month. And based on that, they compile their jobs report. Now, they revise this jobs report three times. There are two monthly revisions, one that occurs one month later, the next that occurs two months later, and then there's also an annual benchmark revision.

2:41The reason for this revision is because there is some amount of guesswork in how the BLS puts together its data. The initial numbers are preliminary. For example, they don't have any ability to account for brand new businesses that have just formed, nor can they account for businesses that close in real time. So they use a mathematical model to estimate those types of monthly payroll changes. They also have to seasonally adjust their estimates in order to remove naturally occurring variations based on holidays, weather, school calendars, things like that. And of course, the BLS looks at both private and public employers.

3:21Now, the reason I'm going through this is because I want to draw a comparison to how ADP puts together its report. And the reason for that is because we know the ADP numbers, which is ADP reports that we lost 32 ,000 jobs in the month of September. But I want to contextualize the data set through which that determination was made. So ADP is a private payroll processor. They do not have public sector data. They only have information from private employers. Now, because they have such a big data set, they cover about 26 million U.S. workers across 460 ,000 private sector clients or companies. Because of the size of that data set, they necessarily do have a lot of different industries and geographies and sizes.

4:08However, unlike the BLS, they don't necessarily have a deliberately constructed representative sample. They are simply surveying their clients because they're a private company. With that in mind, let's take a look at how jobs shook out in the month of September. Big companies, meaning more than 500 employees, actually did really well. Big companies grew by 33 ,000 net jobs. Midsize companies did worse. And smaller midsize companies did even worse than bigger midsize companies. Companies between 250 to 499 employees lost 9 ,000 jobs. Companies between 50 to 249 employees lost 11 ,000 jobs. And then small companies did the worst of all.

4:56Companies that had between 20 to 49 employees lost 21 ,000 jobs. And companies between 1 to 19 employees lost 19 ,000 jobs. So what we see here in the ADP data is a clear, clear pattern of the smaller the company, the harder it got hit, and the bigger the company, the better it did. And that pattern played out at every tier of company size, from the smallest of small all the way up to large. Now let's take a look at industry. Natural resources and mining grew. True. They gained 4 ,000 jobs in the month of September. But construction lost 5 ,000 jobs. Manufacturing lost 2 ,000. Trade, transportation, and utilities lost 7 ,000.

5:42Information actually grew by 3 ,000 additional jobs. Financial services lost 9 ,000. And professional and business services lost 13 ,000. The biggest growth, and this is consistent with what we've seen in the last many, many months of data, the biggest growth came from education and health services. That grew by 33 ,000 jobs in the month of September, according to the ADP report. We've seen that in the last many, many months of BLS reports as well, that has consistently shown that health services, health care and health services, is consistently the biggest winner when it comes to job growth. The biggest loser last month, the only industry that did even worse than professional and business services was leisure and hospitality.

6:26That lost 19 ,000 jobs. One of the questions that someone recently asked me on the Twitter X social media platform was, is this slowdown in jobs related to tariffs? The data in the September ADP report does not provide evidence of that. We see that the sectors that have suffered the greatest number of job losses are predominantly service sectors rather than goods sectors. Now, another question that I've received is, what would this data look like if we included government jobs? Obviously, in the absence of the BLS report, the only answers could be speculative. But here is what we know. Federal employees who resigned from their positions and are still receiving severance are formally counted as employed until that severance package runs out.

7:19and a large number of federal employees who in February, March, April agreed to resign from their positions, those employees received severance packages that expire at the end of September. This means October will be the first month in which they do not have severance and therefore will be counted as unemployed. And what that means is that the October data will show us how much of a reduction we have had in our federal workforce. So even if the BLS, if and when the BLS does put out its September report, we will see some shift in public sector jobs. But the big shift that we are expecting to see will come in the October report, which is published in November.

8:11So tune in to the November First Friday episode for what's sure to be one of the most fascinating reports that the BLS will put out. It's certainly one of the most anticipated BLS reports. That's coming up in the November First Friday episode. Until then, we can only speculate. Let's turn our attention to interest rates. The Fed met on September 16 and 17, and at the end of that meeting, they announced a quarter-point rate cut. This was so widely expected that the markets, the futures markets, had already priced in a 100 % probability of a rate cut. In fact, the markets were betting a 91 % probability that it would be a quarter point cut, and then the other 9%, they were betting that it might be a half point cut.

8:59Now, much has been made online of the fact that the day after the rate cut, mortgage rates ticked up just slightly. And so I want to explain why and what happened. For a deep dive into this, listen to our episode that we recently published with Karsten Jeska, who is a former Fed economist. We published that episode right before the Fed met in mid-September. One of the points that Karsten made was the slogan that I really like, buy the rumor, sell the news. Buy the rumor, sell the news. What does that mean? in the context of Fed rate cuts, it means that when the markets are anticipating something happening in the future, they already price that in and they already adjust accordingly.

9:46So in this case, because the markets so overwhelmingly priced in the probability of a September rate cut, the 10-year treasury, which is what mortgage rates are based on, had already adjusted to reflect that anticipation. And so then when the Fed rate cut actually happened, there was no real market movement because the Fed did what everybody had already expected and had already priced in anyway. The bigger thing that people were paying attention to is whether or not the Fed would signal a likelihood of cutting rates at its October and December meetings. And they did signal that. So the overwhelming consensus right now is that in both October and December, the Fed is likely going to make two more rate cuts, probably a quarter point each.

10:35What does that mean for the mortgage market? Well, it means that the 30-year fixed rate mortgage is pretty close to its 52-week low right now. So according to Freddie Mac, as of yesterday, Thursday, October 2nd, the national average for the 30-year fixed rate mortgage was 6.34%. To put that into context, the 52-week range is between 6.26 % and 7.04%. So we're pretty close to the bottom of the 52-week range. What does that mean for the housing market? Things still aren't moving. There's very much a stagnant market, as evidenced by high inventory and high average days on market. And why is that?

11:17Well, largely it's because existing homeowners have lower interest rates, And most existing homeowners don't want to trade their lower interest rate for a higher interest rate. So to put some numbers on this, according to National Mortgage Professional, 80.3 % of homeowners have a mortgage rate that's below 6%. So four out of every five have a mortgage interest rate that's below 6%. 70.4 % have a mortgage interest rate that's below 5%. and more than half, 52.5 % of existing homeowners have a mortgage interest rate that is below 4%. In fact, and I'm not trying to throw too many numbers at you, but let me just offer one more.

12:00One in five homeowners, 20%, have an interest rate that's below 3%. This means that the lock-in effect has a long, long way to go before it completely dissipates. There are some positive signs. For example, between July and August, contract signings in the U.S. rose by 4%. That's according to data from the National Association of Realtors. Pending home sales as of August reached a five-month high, and home sales rose 3.8 % from the same month one year ago. But data from Redfin suggests that the pending home sales reading as of September showed a slightly weakening demand. And home prices in around 30 of the 50 biggest cities have actually softened by a hair.

12:47This is predominantly in the South and in the West. So Austin, Tampa, Dallas, Miami, San Francisco, Phoenix, and Denver have all seen declines in the value of single-family homes. ranging from half a percent in Denver and San Diego to 2.8 % in Tampa. That said, nationally, home values are up 1.7 % year over year. This is according to data from the S &P Cotality Case-Shiller Index. What we're seeing overall is that markets that are in the Midwest, which still have some degree of affordability, are the markets that are seeing the most movement. So as of August, pending home sales in the Midwest were up 8.7 % from the previous month.

13:30And that's the highest among all regions across the U.S. That's according to data from the National Association of Realtors, as reported to MarketWatch. You know, coming out of all of this data and zooming out a little bit, what are the big picture trends that we're seeing? Remember during the pandemic when we saw this huge housing boom, particularly in the Sun Belt? We saw real estate prices skyrocket overall nationwide, but the South and the West, the Sun Belt, really led that. And meanwhile, at the time, the Rust Belt kind of lagged. What we're seeing right now is an inversion of that. We're seeing that the South and the West, which may have gotten too hot during the pandemic era, are now cooling off.

14:14And meanwhile, the Midwest and the Rust Belt, particularly in cities that still has good affordability, relatively speaking, and that's supported by strong, steady local economies that have a diversity of industries. You know, think about Indianapolis, think about Columbus, think Cincinnati. These are all places with very strong economic fundamentals. And that's where we're seeing more transaction volume, lower days on market, overall more buyer demand, which results in the Midwest leading the pack when it comes to home price appreciation. You know, one of the questions that I've long grappled with when it comes to where should you buy rental properties is the question of do you consolidate all of your rental properties into one location or do you spread them out and have some geographic diversity?

15:02There are pros and cons to doing both. Certainly the benefit to geographic concentration is that that initial workload of identifying your team, finding your property manager, your electrician, your plumber, your HVAC technician, learning how to navigate the permitting system, or heck, even the county website, which is not necessarily user friendly. right? That initial getting to know a place only has to happen once if you have geographic concentration. And so that is certainly an argument in favor of that. But the argument in favor of diversification is that when you have rental properties in a variety of different regions, then that diversification can buffer some of these regional variations when it comes to the housing market.

15:50I myself have properties in Georgia, Indiana, and Nevada. And I chose that in part because I wanted exposure to the South, the Midwest, and the West. And honestly, the place I'm missing, I was talking to Joe about this the other day, I'm missing Arkansas. If I were to go into a fourth place, it would be there. Regardless, the overall state of the housing market is such that it is a fantastic time to be a buyer. It is a stressful time to be a seller. If you can hold off on selling, I would recommend that you do so, provided that your budget allows for that. Again, all normal disclaimers apply. All real estate is local, as we've just been discussing.

16:31So what I'm stating right now are broad aggregate statements, and your local conditions may vary. But nationwide, this is a time when, as a buyer, you will be facing almost no competition, perhaps zero competition. You might be the only offer that a seller gets. after that seller's home has been languishing on the market for two months, three months, four months. So as a buyer right now, you have a great deal of power. And you can use that not just to see if you can lower the price, but also, importantly, to score concessions on everything from repairs to closing costs. So if it's financially viable for you to do so, then I would take advantage of the buyer's market while we have it.

17:17I'll be writing quite a bit more about this in my newsletter, affordanything.com slash newsletter. Again, that's affordanything.com slash newsletter. And that's completely free. The age at which you can claim Social Security might go all the way up to 70. If it did, it would actually only solve half of the Social Security shortage problem. We're going to talk about that topic, the future of Social Security and what it might mean for your retirement. We're also going to talk about Bitcoin and gold hitting new highs. We'll discuss the latest inflation data. We'll talk about consumer sentiment. All of that is coming up next.

17:59The kids are back in school now, and I finally have some extra time to plan a weekend getaway for just us. We've been wanting to visit Lancaster County, Pennsylvania for a while now because I've heard so many people rave about it. We love exploring new places, finding the cutest shops and eating at restaurants that the locals love. DiscoverLankaster.com is the best place to learn about the unique things to do and upcoming events. Plan your trip alongside us at DiscoverLankaster.com slash Amplified. I want to shout out to all the small business owners out there. You wear a million hats. You're doing a lot of things and you show up for your team every single day.

18:35Gusto can help you take some of that load off, especially when it comes to payroll, benefits and compliance. Gusto is online payroll and benefits software built for small businesses. It's all in one, remote friendly, and incredibly easy to use. So you can pay, hire, onboard, and support your team from anywhere. We're talking about automatic payroll tax filing, simple direct deposits, health benefits, commuter benefits, workers comp, 401k, you name it, Gusto makes it simple. One monthly price, no hidden fees, and you get automated tools that are built right in. Offer letters, onboarding materials.

19:13So you save lots of time. You get direct access to certified HR experts, and it's quick and simple to switch. I've been using Gusto since 2017 or 18. It's been a long time. I remember I was living in Las Vegas at the time, and I brought on my first team member, a woman by the name of Erin, who ended up working with us for six years. That was when I got on Gusto and I'm still there today. Try Gusto today at gusto.com slash Paula and get three months free when you run your first payroll. That's three months of free payroll at gusto.com slash Paula. One more time, gusto.com slash Paula, G-U-S-T-O dot com slash P-A-U-L-A.

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20:31Terms and conditions apply. See dell.com for details.

20:43Welcome back. The Commissioner of the Social Security Administration, Frank Bisignano, told television host Maria Bartiromo, quote, I think everything's being considered, end quote, when Bartiromo asked if he would look at raising the retirement age. Later, a spokesperson for the Social Security Administration clarified his remarks, stating that Bissignano, quote, outlined that there are a whole host of items being considered and that eight years is a long way away, end quote. The reason that that spokesperson brings up eight years is because that is the amount of time it will take before Social Security becomes insolvent.

21:24Now, to clarify what that means, there are two trust funds inside of Social Security. There's OASI, Old Age and Survivors Insurance, and there's DI, Disability Insurance. So there are two trust funds inside of Social Security. Currently, OASI, the Old Age and Survivors Insurance Trust Fund, which is the trust fund that pays the majority of Social Security's beneficiaries, that fund is projected to become insolvent in the year 2033. Now, if you were to combine the two trust funds, if you were to combine OASI and DI, that would buy an extra year. If we were to combine them, then the combined reserves of the two trust funds together would have enough revenue to be able to pay all scheduled benefits and cover its associated administrative costs until 2034.

22:19What would happen in 2034? Well, when the funds become insolvent, that doesn't mean the payments go to zero. It means that beneficiaries get a reduced version of those payments. If the two trust funds were to be combined, then according to a report on ssa.gov published in June, if the two trust funds are combined, then starting in 2034, beneficiaries will receive 81 % of benefits payable. So for every dollar that you are owed from Social Security, you'll get 81 cents on the dollar. What would happen if the two trust funds are not combined, if they continue to be held separately and administered separately?

23:00If that were to be the case, OASI would be depleted by 2033, and 77 % of benefits would be payable from that point forward. So for every dollar that you expect to collect from Social Security, you'd get 77 cents on that dollar. Neither of those options sound palatable. Receiving 77 % of your benefit or receiving 81 % of your benefit starting in either 2033 or 2034, neither of those sound great. The question then becomes, what can we do to save Social Security from its impending insolvency? Well, the Social Security Commissioner, in addition to floating the idea of raising the age at which you can collect benefits also pointed to a variety of other options.

23:49So one option is increasing the maximum amount of taxable earnings that are subject to social security tax. Right now, the first$176 ,100 of your income is subject to social security tax. Any amount that you make above that is not. So increasing that maximum amount of taxable earnings is one of many options. There's also the option of permanently raising payroll taxes for all income groups across the board by 3.65 percentage points. That's another option that the commissioner discussed. And then there is the option of, in the words of the commissioner, Bisagnano, the option that future generations, quote, will probably have a different set of rules, end quote.

24:38What he's referring to by that is that the different set of rules would be the rules around when you can claim full retirement age. Now, the last time that full retirement age was increased was back in 1983, when Congress passed legislation to gradually increase full retirement age from 65 to 67. And this was a gradual process, beginning with people who were born in 1938. And it was phased in over the next 33 years in order to improve the financial stability of Social Security and in order to reflect increased life expectancies. And so Congress decided to implement this increase in two-month increments for each successive birth year, finally reaching the age of 67 for people who were born in 1960 and later.

25:26So the legislation that Congress passed back in 1983 implemented a slow two-month-per-birth-year increase in the full retirement age. That way, retirees were not caught off guard and people had decades to be able to plan accordingly. This same legislation also increased the financial bonus for delaying benefits, voluntarily delaying benefits, beyond the full retirement age. So it is already the case that if you voluntarily delay taking your retirement benefits up to the age of 70, you receive an increased benefit amount. This is a system known as delayed retirement credits or DRCs. How it works is that the Social Security Administration will add an 8 % delayed retirement credit to your benefit for each year that you delay past your full retirement age up to a maximum of age 70.

26:23I should note for anybody who's thinking about doing this, and this is very, very important, regardless of when you claim Social Security, you should absolutely apply for Medicare benefits within three months of your 65th birthday. If you do not do that, you could potentially face higher premiums for life. The penalties for delaying Medicare are permanent and unforgiving. So remember, apply for Medicare benefits within three months of turning 65, regardless of when you choose to claim Social Security. Okay, now going back to this conversation around increasing full retirement age, last year in December 2024, Kentucky Senator Rand Paul introduced an amendment to the Social Security Fairness Act proposing to raise the full retirement age to 70, and that would be implemented in three-month annual increases until that threshold is reached.

27:17However, that amendment was not adopted. The conversation and the debate around it, though, has remained in the zeitgeist and became the subject of a study by the Congressional Budget Office, or CBO, which estimated that increasing full retirement age to 70 would address roughly half of the system's shortfall. Half. So even if Social Security were to raise the full retirement age, we would still likely need other measures, including a potential payroll tax increase, to be able to cover the gap. And this, if you will allow me to editorialize for a moment, this is one of the major reasons why I love Roth accounts, because Roth accounts allow you to lock in today's tax rate, even with the looming threat that tax rates might be higher in the future.

28:06And so that is the latest update regarding the debate around how to solve the social security insolvency problem. Consumer spending is up even though consumer sentiment is down. In fact, we have rarely had this big of a disconnect between what consumers say they feel versus how consumers behave with their wallets. According to data from the BEA, the Bureau of Economic Analysis, consumer spending in August rose by six-tenths of a percentage point, and that came on the heels of increases in July and June of half a percentage point each. August is the latest month for which they have published a consumer spending report.

28:47The next report is due out on Halloween. Once again, watch for the first Friday episode of November, in which we will have the latest sets of numbers from them as well. But what we've seen across the June, July, and August report is that consumer spending is growing at a rapid rate. And that actually flies in the face of what consumers say they feel, because according to the University of Michigan, which publishes a consumer sentiment index, consumer sentiment in September fell significantly. It's now at its lowest level since May, and it fell broadly across all age, income, and education groups.