1 big thing: You still can't afford a house

2. Charted: No, really. Houses are expensive

3. Catch up quick

4. Message received 

5. 💬 Quoted: Crypto's last resort 

Illustration of a crumpled dollar bill with binary code over it

😎 It's Day 2 of summer. The outdoors beckon. And who needs work anyway? Beyoncé is pushing strong Great Resignation energy in her new song. Even your boss wants to quit. But we won't quit you, dear readers!

⏰ Fed chair Jerome Powell is testifying before the Senate Banking Committee at 9:30am ET; our friends at Axios Macro will be watching.

Today's newsletter, edited by Kate Marino, is 1,007 words, 4 minutes. 

🎸1 thing Matt loves: Power pop. It's a guilty pleasure. But if you're like me, check out the new record "40 oz. to Fresno"  from Los Angeles' Joyce Manor.  Great hooks and harmonies reminiscent, to my ears, of Weezer's best work.     

National

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Stay on top of the latest market trends and economic insights

Axios Markets

1 big thing: High (yield) anxiety 

Illustration of a hundred dollar bill with a huge price tag. 

Bonus chart: It's expensive out there

2. Catch up quick

3. More than a million moms 

Illustration of baby blocks with dollar signs

4. 📉 😫 💸 Slump worsens as recession worries grow

5. Who are you calling a genius?

😅 Friday! We've got a balanced portfolio for y'all this morning — stocks, bonds, and some news about performance reviews. It's that time of the year, you know. 

Tomorrow, keep an eye out for Felix's inaugural edition of Markets Weekend ... then, we'll all be taking Monday off in observance of the Juneteenth holiday. See you back here on Tuesday morning.

Today's newsletter, edited by Kate Marino, is 1,221 words, 4½ minutes. 

1 big thing: White House targets gas prices

Illustration of a gas pump with the hose forming a descending stock trend line. 

2. Charted: Massive margins for oil refiners

4. Power shift 

5. 💬 Quoted: Powell just says "no"

Elizabeth Warren exchange with Jerome Powell over gas and food prices

⛽️ Good morning, everyone. Hope you're properly caffeinated because today we're all about power — from the $$$ gas that fuels our cars to the leverage we have with the boss. 

Oh, and Matt goes deep on what he's dubbed, "one of the most unsightly financial terms of our time:" crack spreads. 

Today's newsletter, edited by Kate Marino, is 1,141 words, 4.5 minutes.

📖 1 book Emily loves: "The Outsiders," S.E. Hinton's 1967 novel about the class struggles of a group of boys growing up in Tulsa, Oklahoma — the poor greasers battle with the snotty and rich "Socs." 

It's where I learned the Robert Frost quote I used above. I must've reread her book — incredibly Hinton wrote it when she was still in high school — approximately one-bajillion times growing up. I haven't picked it up since, but it still holds a place in my heart. 

Readers, did you have a favorite book growing up? Have you read it as an adult? Reply to this email and let me know.

1 big thing: Boosting Black homeownership

3. An unsettling pattern

4. The friends we lost along the way

Illustration of one person holding a mug that has half of one "Best Friends" heart on it. 

Tuesday already! It's Matt, and we're almost halfway to the weekend. (Sorry, but it was so insanely nice the last few days, it's hard to pry myself out of the garden.) 

Below, Emily spotlights an intriguing new program to boost homeownership in Black and Hispanic neighborhoods. I talk about a troubling trend in the recent run of economic data. And we've got Markets' first-ever reader-contributed "1 thing we love." Excelsior! 

Today's newsletter, edited by Kate Marino, is 950 words, 4 minutes.   

📩 1 thing a reader loves: Legos! Fredrick Lee, a reader in Inglewood, Calif, writes: 

With work and the constant barrage of doom and gloom in the world, Legos are the things that I love.  It is my mental therapy that gets the creative juices flowing and provides unbelievable decompression chamber for me.  

Yes, I buy the expensive sets to build and take apart for my own creations, but it feels soooo good to let creativity flow and go.  More adults need to get back to those childlike hobbies, it does a mind, body, and soul good.

1 big thing: Revlon's meme bankruptcy

Animated illustration of a tube of lipstick rolling up to reveal a hundred dollar bill. 

2. Charted: Birth of a meme

4. Farewell to the pre-COVID supply chain

Illustration of shipping containers sacked like Jenga blocks with a hand removing one

5. 💬 Quoted: "It's going to drive prices up" 

Friday. We made it. Matt here ... Kate Marino's starting us off with a glimpse of the restructuring drama surrounding Revlon and the bizarre fact that its shares have become the new hot plaything for the meme stock crowd.  

Today's newsletter is 819 words, 3.5 minutes. 

📖 1 thing Matt loves: “An Engine, not a Camera,” which might be the single best book on finance I’ve ever come across.

In it, sociologist Donald MacKenzie lays out something I’ve always suspected — that abstruse finance theories don’t so much tell you how the markets work, but determine the way markets work. 

The heart of the book explores how the Black-Scholes model, developed by academics in the late 1960s to price options, was actually a pretty poor predictor of prices at first but grew more accurate as traders came to rely on it. 

In other words, the theory became part of the conventional wisdom on Wall Street. The more people relied on it because they thought it worked, the more it worked. Until it suddenly didn’t. (See the stock market crash of 1987.) 

Remote work may be convenient, but it limits the number of people you meet on the job, a new analysis finds. And that can have downsides for employees and companies.

The report follows similar research that found employees are more siloed in teams when they work remotely, published in the journal Nature Human Behaviour last year.

Why it matters: Companies have an interest in making sure employees have a wide network; it fosters collaboration and loyalty. The analysis is another data point in the "go back to the office" camp, espoused by the likes of Elon Musk.

 Details: Even after a year, those who started a new job in March 2021 had 68% fewer connections inside their companies than their more tenured peers had at a similar juncture in employment, according to the findings.

Researchers looked at data — including emails, Slacks and calendar invites — from 1,300 workers at tech and finance companies in the U.S. and Europe.

The report concludes that this is an issue that stems from "ineffective onboarding."

Offsites might help, too. "The best outcomes come from just taking the team out once every one or two months and doing proper offsites," said Jan Rezab, the CEO of Time Is Ltd., a workplace analytics firm, which released the report.

Our thought bubble: As someone who went from working in-person five days a week to working remotely, I'm skeptical that even regular offsites can replace in-office network effects — where you wind up talking to folks with whom you'd never actually work.

Certainly, serendipitous interactions, like the time I made an office best friend because we met in a restroom, are difficult to replicate on Slack and Zoom. 

The bottom line: But people sure like to work remotely — so companies will have to find new ways to foster relationships and loyalty.

Remote employees more siloed and have fewer connections, study finds

Working from home may be convenient, but it limits the networks that foster collaboration and loyalty.

Remote work

Economy & Business

This is the least pandemic-y summer in two years, but inflation is dragging down the celebration.

Why it matters: Most Americans are now getting their first taste of living in a high-inflation environment — and they don't like it.

Prices are up nearly across the board for a lot of things we love to do in the summer, including: 

Regular gas prices now average $5/gallon, per AAA — and well over that in some parts of the country. Even if your pay has kept up with inflation (and not everyone's has), the sticker shock can be demoralizing.

 "It just feels bad to spend $5 when you're used to spending $3," said Carola Conces Binder, an economics professor at Haverford College.

Dining out: For those who've taken a two-year break, there's a bit of a Rip Van Winkle effect when it comes to eating at restaurants.

Menu prices are eye-popping, and there's more sticker shock when the check arrives — restaurants are adding "service fees" and tacking on extra charges, The Wall Street Journal reported.

Driving the news: The government's Consumer Price Index shows average prices rose 8.6% over the last year — a level last seen in the 1970s, an era known for such mood-dulling terms as stagflation and malaise. 

"If you're a millennial and all you've ever known was a 2% rate of inflation, this is really bad," economist Richard Curtin told Axios earlier this year.

From 1976 until just recently, Curtin ran the University of Michigan's consumer sentiment survey — an influential indicator, which measures mood, that recently hit its lowest point since it started in 1952.

On the other hand: While rising prices are starting to pinch — and for some lower-income earners, the pain is a lot worse than that — there are reasons to be cheerful. 

The unemployment rate is low and Americans are doing substantially better than folks in many corners of the world.

Plus: You could theoretically spend your summer sipping AriZona iced tea and eating Costco roast chicken while reading books — three products with stable prices.

And, people who are already frugal are certainly having their moment.

The bottom line: The American economy runs on people spending money — it's 70% of economic activity, after all — and for most of us there's nowhere to run from rising prices. 

Caution: Bummer summer ahead

All our summertime staples are getting more expensive.

Illustration of a dollar sign anchor dragging through the sand

Inflation

This is the least pandemic-y summer in two years, but <a class="gtmContentClick" data-vars-link-text="inflation" data-vars-click-url="https://www.axios.com/2022/06/10/inflation-cpi-may-fastest-pace-40-years" data-vars-content-id="6d466799-6fe3-447d-a664-b1f6d89f89a5" data-vars-headline="Caution: Bummer summer ahead" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/06/10/inflation-cpi-may-fastest-pace-40-years" target="_self">inflation</a> is dragging down the celebration.Why it matters: Most Americans are now getting their first taste of living in a high-inflation environment — and they don&#x27;t like it.

Data: U.S. Census Bureau; Chart: Simran Parwani/Axios

For more than a year, Black and Hispanic homebuyers have gotten $5,000 in down payment or closing cost assistance from JPMorgan Chase, part of a new program meant to help close the racial wealth gap. 

Why it matters: If adopted on a wider scale, this kind of targeted program — which specifically tracks lending to borrowers of color, a radical departure — might help increase Black homeownership rates. JPMorgan is the first bank to give it a try.

These types of programs "could provide the kind of homeownership boost to Black communities today that the New Deal provided to white people in the 20th century," write the authors of a February paper published by the Urban Institute.

How it works: The bank created what's known as a special purpose credit program (SPCP), a policy made possible by the 1974 Equal Credit Opportunity Act that's gaining traction now, especially after federal regulators across several agencies issued a statement on SPCPs in February.

The law prohibits discrimination in lending, but there's an exception allowing banks to create these SPCPs for disadvantaged classes of borrowers.

JPMorgan implemented the program in specific census tracts with majority Black populations. There are 6,700 such areas across the U.S.

The bank chose this route instead of simply offering the money to Black borrowers because it's tricky to track the race or ethnicity of homebuyers while staying in line with non-discrimination laws.

Yes, but: The bank wouldn't say how many borrowers have received the grants, but even if the numbers were substantial, one bank's program is small relative to the massive size of the U.S. mortgage market. Close to 70% of mortgages are not originated by banks in the U.S.

Gentrification is a "potential unintended consequence" here, Cerita Battles, the bank's managing director and head of community and affordable lending, said at a recent panel on SPCPs. 

The grants could wind up going to white borrowers seeking to move to Black neighborhoods. She said the bank is closely monitoring the process to avoid this. So far, 57–60% of the bank's SPCP assistance has gone to Black and Hispanic customers, she said.

The program could also reinforce already existing housing segregation.

The backstory: The large gap in homeownership rates between Black and white Americans drives a massive wealth gap, which in turn perpetuates inequality, as banks typically want to lend to borrowers who already have money.

This gap is deeply rooted in the U.S. housing system, but after the protests during the summer of 2020, the bank pledged to spend $30 billion over five years to address racial inequity in lending — the largest such lending commitment at that time, as Axios reported. 

This program is related to that pledge — though there is neither a cap on how much the bank can spend nor a time limit, Ashlei Bobo, a spokesperson at Chase Home Lending, tells Axios.

The program is distinct from other private efforts to close the racial homeownership gap, which target low-income borrowers as a proxy for race. Experts say it's more effective to target the problem more directly.

"We are deluding ourselves if we believe we will cure centuries of race-based discrimination without targeted measures," wrote the authors of a piece on SPCPs at the National Fair Housing Alliance.

What they're saying: Walter Suazo, a 27-year-old restaurant consultant in New York, used the SPCP program to buy a one-bedroom apartment last year. He's the first in his family to be able to own his own home. 

Suazo, who is Hispanic, hopes more people will take advantage of the program, which he learned about when he went to the bank to apply for his mortgage. "I know JPMorgan has money to give," he said.

What to watch: In early June, Fannie Mae —a pivotal player in the mortgage market — made SPCPs a central part of a new plan aimed to encourage racial equity in housing.

One bank's program to boost Black homeownership

The JPMorgan Chase program helps with down payments and closing costs.

Deep Dive: Hard Truths - Housing

For more than a year, Black and Hispanic homebuyers have gotten <a class="gtmContentClick" data-vars-link-text="$5,000 in down payment" data-vars-click-url="https://media.chase.com/news/chase-homebuyer-grant" data-vars-item="in_content_link" href="https://media.chase.com/news/chase-homebuyer-grant" target="_blank">$5,000 in down payment</a> or closing cost assistance from JPMorgan Chase, part of a new program meant to help close the racial wealth gap. Why it matters: If adopted on a wider scale, this kind of targeted program — which specifically tracks lending to borrowers of color, a radical departure — might help increase <a class="gtmContentClick" data-vars-link-text="Black homeownership rates" data-vars-click-url="https://www.axios.com/2020/12/19/hard-truths-deep-dive-housing-racial-homeownership-gap" data-vars-item="in_content_link" href="https://www.axios.com/2020/12/19/hard-truths-deep-dive-housing-racial-homeownership-gap" target="_self">Black homeownership rates</a>. JPMorgan is the first bank to give it a try.

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

Data: National Association of Realtors; Chart: Axios Visuals 

The real estate market is slowing down, but that doesn't mean home prices are getting more affordable — yet. Actually, prices and rents are still going up.

Why it matters: Perhaps you thought that the real estate market was all about location, location, location. Well, it's actually also about supply, supply, supply. The U.S. doesn't have enough homes to meet demand — even now, as fewer people want to buy in the face of rising mortgage rates.

"The affordable housing problem is going to stick around no matter what," says Redfin chief economist Daryl Fairweather.

This is yet another sign of how hard it'll be for the Fed to break the back of rising inflation.

Driving the news: Fresh data from the National Association of Realtors showed that the spring selling season is slow this year, with sales in May down 8.6% from last year.

At the same time, the median price for an existing home crossed the $400,000 barrier for the first time.

The number of sales dipped as buyers were scared off by mortgage rates hovering near 6%. And would-be sellers aren't incentivized to move — most are sitting on very low mortgage rates scored during the pandemic refi boom.

Meanwhile, rents are soaring. New rents on single-family homes (which make up half the residential market) were up 14% in May from last year, according to CoreLogic, a real estate analytics firm.

In Miami, rents were up 41% from last year!

Another rental report out Wednesday, from Realtor.com, shows median rents up 26.6% from before the pandemic — but a slower rate of increase in recent months.

Rising mortgage rates could actually put more pressure on the rental market: As first-time buyers put off a new purchase, they'll continue to rely on renting. 

Between the lines: In a healthy housing market there should be a four- to six-month supply of homes for sale; that's the length of time it would take to sell off all the inventory.

Right now we're at a 2.6-month supply, according to the NAR report. Still low, but actually a 33% increase since February, notes Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Shepherdson is one of the few housing market observers who is betting on home prices falling, rather than just leveling off. In his research note, he explains that after he calculated seasonal adjustments, single-family home prices actually fell slightly in May.

The market is "grim and will soon be grimmer," he wrote.

Zoom out: Partly because of the role real estate played in the financial crisis, a lot of folks are looking at housing now as a barometer for the overall economy. But we're in a whole different ballgame compared to 2007 — homeowners are sitting on record levels of equity and cheap mortgages.

What to watch: There's a lot of talk of recession risk, and certainly a downturn would impact the housing market. A rise in unemployment could cause an uptick in loan distress — but not to the levels we saw then, thanks to those equity cushions and stronger mortgage underwriting, says Molly Boesel, a principal economist at CoreLogic.

Home prices keep rising, even as the market cools

"The affordable housing problem is going to stick around no matter what."

Housing

A "For Sale" sign outside a house in Crockett, California, on May 31, 2022.

The real estate market is slowing down, but that doesn&#x27;t mean home prices are getting more affordable — yet. Actually, prices and rents are still going up.Why it matters: Perhaps you thought that the real estate market was all about location, location, location. Well, it&#x27;s actually also about supply, supply, supply. The U.S. doesn&#x27;t have enough homes to meet demand — even now, as fewer people want to buy in the face of rising mortgage rates.

There are increasing signs that workers' power — a consequence of the hot COVID-era economy — is leveling off or even eroding in some sectors.

Why it matters: The super-tight labor market has been great for working people but a little too spicy for the Fed's taste — chair Jerome Powell has cited it as a factor driving inflation. Now there are signs his rate hikes are having the intended cooling-off effect.

What they're saying: "It's not that workers have lost power, it's just that they're not increasingly gaining it," says Nick Bunker, economic research director at Indeed.

Details: There are still way more job listings on Indeed than there were before the pandemic started — a clear sign of high demand for workers — but postings are coming back down from the highs of last year.

The tech sector, where we've seen the most layoffs over the past month, is notching some noticeable declines. Listings for "software developers" fell about 7% over the past four weeks, Bunker says.

The folks at the Layoffs tracker website noted 109 layoff events so far in June, compared to 75 the prior month and just 17 in March.

Fear factor: You can't discount the role psychology is playing in the power equation. Employers fearing a recession are pulling back postings, Bloomberg wrote earlier this week. At the same time, workers are starting to worry about job security, as we reported. 

Meanwhile, the Wall Street Journal is giving advice on how to keep your job.

And yet: Remember, the unemployment rate is still really low!

What to watch: Whether the quits rate starts to ebb, Bunker says. So far it's held relatively steady, a sign that workers are still feeling that leverage — confident enough to risk a new job.

The next report is due out from the Labor Department in July.

Job market power is swinging back to employers

"It's not that workers have lost power, it's just that they're not increasingly gaining it."

Jobs

Chart showing trend of job listings on Indeed's website 

There are increasing signs that workers&#x27; power — a consequence of the hot COVID-era economy — is leveling off or even eroding in some sectors.Why it matters: The super-tight labor market has been great for working people but a little too spicy for the Fed&#x27;s taste — chair Jerome Powell has cited it as a factor driving inflation. Now there are signs his rate hikes are having the intended cooling-off effect.

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Job market power is swinging back to employers

Home prices keep rising, even as the market cools

Remote employees more siloed and have fewer connections, study finds

Caution: Bummer summer ahead

One bank's program to boost Black homeownership

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💄 Meme bankruptcy

🛢 Cracked

🏠 Supply, supply, supply

📉 Three's a trend

🛑 Choked off