Fed’s Latest Rate Cut Reveals Uncertainty & Workers Turned Off By RTO Policies

0:00Tuesday on NBC, Jimmy Fallon and Bozma St John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best I do win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Congress thought it had a deal to avoid a government shutdown this Saturday.

0:39Then Elon Musk entered the chat. Then the Fed issued its final rate cut of the year. So why did your stock portfolio tank? It's Thursday, December 19th. Let's ride.

0:54Good news, Neil. You can finally plan that trip to Washington state you've been putting off. That's because officials announced yesterday that the so-called giant murder hornets have been successfully eradicated from the state following a years-long effort to find and eliminate the non-native pest. Murder hornets were first sighted in the area all the way back in 2019, but state officials quickly mobilized to try and contain their presence due to the threat the giant insects posed to their honeybee and other pollinators. Consider that threat contained, too. No hornet has been sighted in the last three years.

1:29Thank goodness, Neil. Giant murder hornet is probably the most appropriate name ever given to an animal. These things can be two inches long. Just think about a hornet that's two inches long in your head right now. They can wipe out an entire honeybee hive in less than 90 minutes by decapitating the bees there and then defending the hive as their own, all while using the brood to feed their baby hornets. They can also sting through beekeeper suits, deliver almost seven times the amount of venom as a honeybee, and sting multiple times. That's why an entomologist in the Washington State Department of Agriculture said, I've been doing this for over 25 years now.

2:06It is a rare day when the humans actually get to win one against the insects. I'm not gonna lie. I remember the peak of murder hornet panic back in 2019, 2020. We were all in lockdown and we're like, now the murder hornets are coming for us as well. So thank goodness. They said the public played a huge role as well, taking pictures and reporting sightings because of course the public played a role. If I saw a two-inch murder horn, I would say something as well. So congrats to Washington State playing your vacay there. Now a word from our sponsor, the Range Rover Sport. Neil, pardon the pun so early in the morning, but one of the best things about the Range Rover Sport is its range.

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3:18Eczema isn't always obvious, but it's real. And so is the relief from EBCLIS. After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintained skin that's still more clear at one year with monthly dosing. EBCLIS, LibriKizumab, LBKZ, a 250 milligram per two milliliter injection, is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema. Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies.

4:18To no one's surprise, the Fed announced its third and final rate cut of 2024 yesterday. reducing the benchmark rate by 25 basis points down to a range of 4.25 to 4.5 percent. So why did all three major indexes finish deep in the red? While the rate cut itself was all but guaranteed, it was the Fed's cautious outlook for 2025 that had investors a little spooked. The Fed is now projecting only two cuts next year as opposed to the four that were anticipated back in September. The Fed also revised their forecast for inflation to 2.5 percent up from the 2.1 % it originally projected. In Jerome Powell's press conference after the announcement, he tried to frame fewer rate cuts as a vote of confidence in the economy, but he also said that the cuts announced at this meeting were a closer call than expected due to just how sticky inflation has been.

5:11So Neil, as we close out 2024 with a pretty strong economy, slowly fading inflation in a stable job market, the question becomes what comes next? And Powell said two rate cuts next year. That was not welcomed by investors. The Dow had its 10th straight day in the red. The S &P had its worst day since August. Yields jumped, which shows that borrowing costs are rising. The mortgage rate jumped above 7 % for the first time. This was a very violent reaction. I think investors who had believed Powell knew what he was doing for the past couple of years saw a little uncertainty in what Powell was projecting for the future.

5:52And I think an even bigger question was, why do we have the rate cut now? A lot of the press conference Powell spent talking about how inflation was sticky and he's worried about inflation. Well, the last thing you want to do when you're worried about inflation is cut rates, which is what he did. So I think those two factors, fewer rate cuts next year and then failure to explain why they cut rates this time led to an extremely violent market reaction. Right. A lot of the reporters there asked some variations of that same question. If inflation is proving to be stickier and you're projecting it to be stickier, then why did you even cut rates on this meeting whatsoever?

6:28ever. And it wasn't guaranteed, even though, remember, the market was pricing a 99 % chance or a 90 plus percent chance that the Fed would cut rates this meeting. There was actually a dissenting vote of the Fed officials that do vote on these rate cuts. So it was a lively discussion, I think, at that table of like, should we cut rates this time around? Powell's response was in effect that future rate cuts aren't guaranteed. So let's do it while the economy is still strong and inflation isn't too high. So rather like to a bird in the hand is worth two in the bush type approach. But you're right.

7:02The market definitely did not like that, especially because, you know, the projections got so much darker. Essentially, we were looking at four rate cuts. Now it's down to two and that could shift even lower if this inflation proves to be as sticky as, you know, Powell is saying it is. Yeah. I think the general interpretation of what Powell was saying was that this was a pause, not a skip. So the next Fed meeting is in January. If Powell signaled that they would just skip a rate cut then and then continuing the rate cuts going forward, I don't think the market would have reacted like it did. But this was a signal that they're kind of pausing this for now.

7:38And one thing I also want to talk about is that, you know, Powell was asked about Trump's policies and how that would impact inflation and rate cuts. And, you know, economists do widely view Trump's policies of tax cuts, mass deportations, tariffs as being inflationary. So, you know, Powell is going to get pelted with questions about how that would shape the inflation and rate cut outlook. He demurred. He said that, you know, it's too early to tell. It's very premature to try to make any kind of conclusion. You know, Powell and Trump were both in the same positions in 2018 and 2019 when Trump enacted a bunch of tariffs on China.

8:19Powell said we can't really learn that many lessons from those tariffs about what might happen in 2025 if there are more tariffs. So we are entering a state of uncertainty that we haven't seen in a few years. Powell compared it to driving on a foggy night or walking in a dark room full of furniture. You just slow down. So the word I think is caution. Let's get Powell on the pod because that's actually a very nice analogy. Congressional leaders released the text of a three-month spending bill on Tuesday that was supposed to prevent a government shutdown, but the stopgap spending bill has a lot of people big mad.

8:52Inside the over 1 ,500-page bill were a few head-scratching inclusions. There's$100 billion earmarked for disaster relief in the wake of a devastating hurricane season, economic aid for farmers, and a commitment to fully fund a rebuild of Baltimore's Francis Scott Key Bridge. But there's also a cost of living pay increase for members of Congress, reforms for pharmacy benefit managers and a measure that clears the way for the Washington Commanders football stadium to be moved from Landover, Maryland back to D.C. Two of the most vocal opponents of the bill were none other than Elon Musk and his Doge co-head Vivek Ramaswamy.

9:28The two wasted no time inflexing their budding political power railing against this stopgap bill. Elon alone posted on X about the funding bill more than 100 times over the course of the last two days. And it worked. House Majority Leader Steve Scalise told reporters that the current iteration of the bill is now dead, while Trump himself voiced his opposition to it as well. You know, this was supposed to be a pretty uncontroversial bill, so Congress could regroup and figure out what their priorities were in the new year, but it's proven to be just the opposite. This is what they call an end-of-year Christmas tree bill, which is where all the lawmakers see this bill that needs to get passed to avoid a government shutdown, which will happen if they don't pass this at 12.01 a.m.

10:14Eastern on Saturday. And they just start decorating it with their own pet projects. You see something like the RFK Stadium getting, you know, moved to D.C. so that the commanders could get back to the district and these other small pet projects. And, you know, it wasn't loved by a lot of right wing conservatives when it was released, but it seemed like it could potentially pass with helps from Democrats. And then all of a sudden I wake up yesterday morning, I see Elon Musk feed going absolutely off. She's showing himself to be an absolute force, even though he's not an elective representative.

10:48He has no official position in government, but he is using his bully pulpit on X to move the needle. And then later in the day, President-elect Trump came out and said, this bill is a disaster. And it looks like they will have to go back to the drawing board, even though we are less than 36 hours away from a government shutdown. Right. It put Musk out a little bit on a limb in the early days because despite some of that opposition from congressional Republicans, like no one had really come out because, again, it is one of those end of year bills. It is just a tide over to keep the government running for the next three months.

11:19But Musk said absolutely no. He weighed in and said like this bill shall not pass. He loved that meme. He posted that multiple times. He literally posted over a hundred times about this, really flexing his weight. Some people started to say, though, that this is a interesting strategy from Elon because right now he's spending some political capital, getting in on a day-to-day skirmish. This is not, in the grand scheme of things, the biggest thing that Congress is going to be facing over the next four years. But here he was tweeting a hundred times about it, even before Trump gets into office. So is he spending that political capital too early and too frequently.

11:57That was some of the kind of analysis of this, even though technically his, you know, bullying the Congress is working in this particular instance. So what would a shutdown mean if it were to happen for people who are, I guess, five years old? You have lived through a government shutdown before. From December 2018 to January 2019, essentially all non-essential federal employees stop working. So at that time, 350 ,000 were furloughed. But then you have the essential federal employees like TSA and air traffic controllers who still will work, but without pay, and then they get back pay. At that last, as that previous government shut down, 420 ,000 federal employees were working without pay.

12:44So we have this big, busy holiday travel season coming up, and you're probably going to encounter TSA agents and air traffic controllers who are not being paid. So that is a very interesting conundrum. So we have until tomorrow to get this bill passed, and we'll see if they go back, streamline it, and take out all of the pork that had been criticized and pass a new one. But certainly, Elon has thrown Congress a curve ball, and it's certainly a sign of things to come. Less flexibility for employees means lower headcount. That's the conclusion of new research from Reveglio Labs, which found that companies requiring return to office grow their workforces more slowly than companies that allow hybrid work.

13:28Since June 2022, companies with hybrid work policies have increased their headcount by 1.6%. For businesses mandating that employees commute to the office, that growth rate is 1%. Now, this could be intentional. Remember, workers have long suspected that return to office mandates were a sneaky way for companies to lay off employees without laying off employees. And one executive seemed to confirm as much after Amazon announced a five day in office requirement starting in January. The AWS CEO said if employees don't want to comply, that's OK. There are other companies around. But hiring fewer people means you're also hiring fewer all star people.

14:07A separate study from the University of Pittsburgh noted brain drain as a significant cost of RTO mandates. The research found companies requiring in-office work took significantly longer to fill job openings and suffered abnormally high turnover, which is consistent with the other study showing slower growth. Toby, do you think corporate bosses are going to look at this and think, hmm, maybe we should be more flexible? Seems like the downsides of an in-person requirement outweigh the advantages. Potentially, but like you said, a lot of these companies that did implement RTO policies were hoping that they would see some turnover.

14:40That was kind of the hidden thing that a lot of these companies were going for. They wanted to trim down their workforce without actually conducting layoffs. Where I do think you will see some of these companies taking pause, though, is that if your skilled employees and if your more senior employees are more likely to leave, that is something that you do not want. You mentioned the brain drain, but yeah, some of these high position or higher pay grade positions are more difficult to feel, and you do not want that to experience a lot of turnover. So I do think you potentially will see some pause, which we've already started to see some companies kind of rethink some of their RTO plans because they haven't gone as smoothly as they expected.

15:20Well, I think you're talking about Amazon. So Amazon, the announcement that they were going to go five days a week beginning in January kind of shocked the HR world. They are the biggest company ever in the world that would require five days to work in office. And it spurred a cascade of other companies like Dell and AT &T to announce return to office requirements. But reports in the past few days showed that Amazon has told certain employees, it could be in the thousands, in certain cities like Dallas and New York, that their offices are not ready to get people back five days a week. They just don't have enough office space.

15:56They didn't prepare. So they told them that they would have to come back into the office, but not until April or May. So there have been a lot of logistical challenges. It's one thing to say, yeah, we want you back in the office. Another thing to get the office ready and have the Keurig pods already and make sure there's enough desk so people aren't huddled all over each other. So Amazon's return to office drama just took another swerve. The last swerve of this study that I want to speak about is not just the quantitative effect of RTO policy, but also the qualitative effect. A lot of employees cited why they hated RTO.

16:31One of it was just the drama that follows it. Amazon, so much drama followed this announcement, and a lot of employees just want to work. They do not want to be constantly mired in this debate. So that was one thing. And then another thing they talked about is that when you institute RTO, you're communicating a culture of distrust, saying that you're tracking our badge sign-ins, like you are making sure we're coming in. Dell was doing VPN tracking to see if people were trying to pretend they were working from one location when they weren't. So it's not just the quantitative factors and effects.

17:03It is also just the qualitative employee morale effects that you have to take into account. Speaking of taking into account, there's one more left in the year. It's the last Neal's numbers coming your way.

17:39miss a meme or milestone. All protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com. This episode is brought to you by State Farm. Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app. It's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there.

18:17Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will make you feel like you just finished a really good book. My first number will have you thinking twice about using your GPS. A new study released in the British Medical Journal found that taxi drivers die at lower rates from Alzheimer's than people in other professions, which maybe suggests that using your brain to navigate the world could ward off the disease. After examining 9 million adult death certificates, researchers found that around 3.9 % of everyone in the data set died of Alzheimer's, but for taxi drivers, the rate was just 1%.

18:53That is not to say that driving a taxi is healthy. In general, they had lower life expectancies compared to the average, But as far as Alzheimer's is concerned, it got to scientists thinking that creating spatial maps in your mind all day could mean a bigger hippocampus, which is the part of the brain responsible for learning, memory, and navigating. These implications are actually really big because what it's implying is that there are things you can do during your lifetime that could potentially reduce your risk for dying of Alzheimer's, which is something that, of course, researchers want to dig into.

19:23Some other interesting things from this finding too is that people who had jobs that involved navigating to a predetermined route, think bus drivers, airplane pilots, ship captains, they did not have a lower rate of Alzheimer's. So there is something about the fact that you do have to spatially reckon, you do have to memorize these routes that did contribute to lower Alzheimer's rates. So that was just a fascinating thing that it's not just using navigational abilities. It is the fact that you cannot be riding a predetermined route. Now, some critics of the study, and there were many, noted some limitations.

19:58First of all, the age of death of taxi and ambulance drivers. Ambulance drivers were the number two lowest risk after taxi drivers, was around 64 to 67 years of age. And Alzheimer's doesn't really set in until 65. So they noted that criticism. And then there's the potential that there's a self-selection going on, the fact that, hey, people who have bigger hippocampi just naturally gravitate to being a taxi driver. So the causation correlation effect doesn't really work because maybe it's not the fact that I'm driving a taxi gives my brain a workout. It's that I really like navigating and going through cities.

20:35That's why I'm gravitating to be a taxi driver. So those are just two of the limitations pointed out. This is not a definitive study, but it certainly raises really interesting questions about how creating spatial maps in your mind can give your brain a good workout. For my next number, America's youth are more straight edge than they've been in decades. An annual national survey of teens showed that substance use is hitting new lows while abstaining from drugs is hitting new highs. For example, about two-thirds of 12th graders said they hadn't used alcohol, marijuana, cigarettes, or e-cigarettes in the last 30 days, the largest share since measuring began in 2017.

21:13These findings have shocked public health officials in the best way. Drug and alcohol use among teens fell the most in history during the pandemic when kids were at home with their parents instead of playing beer pong with their friends. But researchers fully expected the toking and drinking to pick back up when COVID was over. That hasn't happened. And instead of rebounding, drug use has continued to fall years after stay-at-home rules were lifted. Yeah, I think it's because a lot of teens who do end up experimenting with drugs or alcohol, they usually start in the ninth grade, your first year of high school, because you see a lot of your older peers doing it.

21:47But if you break that cycle and the incoming ninth graders never saw anyone drinking or smoking, never experimented with their friends, then as you filter upwards through the generations, every class after that class, the COVID class, is not going to have that experience either. So it is almost a self-fulfilling cycle where you start to see lower and lower usage rates. So I think that was interesting because a lot of people's experimentation doesn't happen in your own room under the supervision of your parents. It happens when you're surrounded by friends, when there's peer pressure involved. So it is a really fascinating downstream effect of those COVID lockdown periods.

22:24For my final number, a question for everyone planning your wedding. Would you pick a date to avoid a conflict with a football game? For lovebirds in college football hotspots, the answer seems to be yes. The Washington Post dove into data from The Knot to find that for the majority of areas with powerhouse college football programs, Saturdays where the local team isn't playing are more popular wedding dates than game day Saturdays. Here's some actual numbers. In and around Auburn, Alabama, 3.8 % of the year's weddings took place on each of the team's idle fall Saturdays since 2022. That's compared to home game Saturdays, excluding Thanksgiving weekend, when an average of 2.1 % of the year's weddings were held.

23:05Let's look at one specific date, too. October 22, 2022. Tober, you remember this date? No. All right. So the Auburn Tigers had a bye week in that market in the Auburn market. Five point three percent of the year's weddings took place that day compared to three point one percent nationally. The Washington Post interviewed wedding planners in the southeast to see if this data was backed up by their own experiences. And they said, absolutely. People do try to plan their weddings for days when the team isn't playing. And this makes a lot of sense to me. There's nothing worse than having to split your attention between the fourth quarter on your phone and the beautiful couple exchanging their vows.

23:40I get that too because I've been at weddings where people are watching college football games and it is a little bit of knowing, but also just the logistics side of it I think is under talked about because college football weekends are a zoo in these towns. So like traffic's a nightmare. Hotel rooms are hard to come by. They're very expensive as well. So I totally understand from that perspective. They also talked to some couples though that just gave up and said, hey, if there's going to be a game on, let's embrace it. Let's one couple created a game lounge at the reception venue where people could go watch the game.

24:10If it is such a big part of your family that people would not be paying attention to your wedding, might as well set up a screen and have everyone watch it together. I can't. I mean, we're sports fans, but that's pretty hard. That is pretty hardcore. I cannot relate to it because we don't have I mean, I'm an Indiana fan now this year, but I can't. I never had that, you know, crazy love for college football. So, I mean, shout out to all the southern couples out there. I know it's bigger. It just means more down there. Let's sprint to the finish with some final headlines. TikTok will fight for its life at the Supreme Court, which said yesterday it will hear arguments on a law that would ban the app on January 10th, nine days before it goes into effect.