Imagine hip hop in the mid-80’s. The genre had sought success with artists like Kurtis Blow, Grandmaster Flash, and The Sugar Hill Gang, but had never truly crossed into mainstream America. Even though I was rewinding Blow’s “Basketball” on cassette in 1985, sadly, no one else was.
Rock N’ Roll was also looking for something different at this time. Foreigner, Dire Straits, and Starship were only punctuated by an occasional ZZ Top hit. This city may have been built on rock n’ roll, but the foundation was giving ground to pop artists like George Michael and Madonna.
Enter Aerosmith and Run DMC this week in 1986 with their collaboration “Walk This Way,” a remake of Aerosmith’s 1975 release. Aerosmith’s career had been dormant for almost a decade. Run DMC’s career, while on the rise, was often compared to the Beastie Boys, who were about to explode in popularity.
“Walk This Way” was like nothing anyone had ever heard before—an electrifying collaboration that crashed through the boundaries of musical genres like Nick Nolte crashing through a table at party. The song was a perfect tapestry of gravel-voice rock and lightning-fast rap.
The song ignited a cultural revolution and set the stage for an era of rock and hip-hop fusion, which now seems unbreakable, but was chasm apart back then. Linkin Park, Rage Against the Machine, Kid Rock, Beck, Korn, Cypress Hill, even Machine Gun Kelly—they probably don’t exist if it wasn’t for “Walk This Way.”
This month’s economic indicators are a lot like that—combining different parts of the economy to create a bit of a hybrid we’ve never seen. For the last six months, I’ve noted the Fed was in danger of putting the national economy on ice without lower rates. Although I’ve been proven wrong on a few fronts—namely, that spending would decline considerably—we’re just not out of the woods yet.
First, the good news: wages, gross sales, labor force participation, air travel, and tourism (hotel occupancy) continue to hold their own. Housing prices have dipped year-over-year for the entire trade area and inflation for the region is at 2.7%. All of these are good signs. And even the Federal Reserve’s own board members and bank presidents think things are going to be just fine.
But some nuance is needed here (as with most things in life). Note that building permits and building valuation are down year-over-year. That’s because builders and risk takers are pulling back. Projects just penciling at current rates. We’re talking straight-up cash flow not being enough to cover debt service. Builders are waiting, and in some cases, shelving projects. Another quarter of this and we’ll see more of a slowdown. Then it’s just a matter of time before consumer spending falls.
Fed Chairman Jerome Powell thinks he needs another round of macroeconomic data so he’s sure. Let’s hope his uncertainty doesn’t cost the economy a year of poor performance. Let’s hope he soon walks this way towards some rate cuts.
Stay safe and God-speed.
Tom
