Justin Fox on the big, boxy apartment buildings that are proliferating at a never-before seen pace post-pandemic; Jonathan Bernstein assesses the progress of the House January 6th Committee public hearings; Shuli Ren and Tim Culpan examine China's economic woes from youth unemployment to weakening economic growth. Hosted by Vonnie Quinn.
Welcome to Bloomberg Opinion. I'm Vonnie Quinn this week. It's terrible to move ahead with something that looks like a partisan prosecution, but it's also terrible to let a president get away with crimes. Jonathan Bernstein on the progress of the House January six Committee, and later a look at China's economic woes with Julie Ren and Tim Coulban. First, people might be coming back to big cities post pandemic. One thing that never went away though, and is in fact proliferating even more post pandemic big box apartment buildings. I spoke to Justin Fox about housing renting and all the problems associated with So justin mortgage rates finally topped six percent, So I imagine there's going to be a lot more renters out there. Is that a question of supply and demand as to how prices go. I mean, clearly we've been switching to more people renting versus owning over the past ten or fifteen years, and I think right now, yeah, if somebody who was looking to buy a house with a mortgage is suddenly going to be a much different situations, so they'll probably be more demand to rent both houses and apartments. The thing is in New York City and I imagine other large cities, pandemic rents meant that it was possible for artists and people who didn't make a whole lot of money to move into the city. Are they all now being pushed out of the city, the ones that had the courage to move. Yeah. And I don't know that there were all that many people who did that or thought that the lower rents would stick forever, but definitely rents went up in all of these suburban areas and in cities like Boise, and those have settled down some, but cities where they fell a lot, especially in New York, they've come careening back up. We're hearing stories about the median price increasing third base effects involved. These are obviously above pre pandemic rerants, but it's a different city as well. Yeah, I mean there's a lot of demand to rent apartments. I guess there were some people who thought, in the depths of the pandemic in two thousand twenty that no one would ever want to live in a city again, But that's not what's happened. Which brings me to one of your recent columns about Big Boxy apart buildings, which really I guess went out of style during the pandemic because you were beating in everybody else's air. There was a lot of people walking in out of the buildings and so on. I mean, I don't know, I don't think they ever went out of style, but definitely you would have thought they would have. Given all the rhetoric against cities and apartment buildings and all, and you know, for a couple of months there as someone who lives in an apartment building, and you know it would have been nice not to have to share the air with everyone else. Well, you looked into the data, and apparently they're actually getting more and more plentiful. In fact, yeah, there's this great annual data release from the Census Bureau that is sort of my favorite data release, and I've seen it be the only person favorite data release who who looks out for it, because it's all these great things like how many fireplaces there are in new houses and how many bedrooms and bathrooms. One of the things they keep track of is just housing units completed by the size of the building in multifamily apartment buildings. And something kind of remarkable happened last year that more apartments were built in Buildings of fifty units are more than ever before in US history. Two D are we talking about across the United States? Across the US where mostly the South is overall where most construction is happening. So just about half we're in the South, and then a lot in the West and less in the Midwest and a bunch of the Northeast. What's the impetus for these big buildings. Part of it is that there's been an increase in demand for apartments, partly because of this slight switch away from ownership since the financial crisis that will now get sort of renewed boost with high mortgage rates. Also, it's that in big metropolitan areas there's limited space on which to build. It's often close to commercial districts because you're less likely to have NIMBI homeowners saying don't build an apartment building there. And increasingly the development of apartment buildings is sort of driven by these big institutional actors, and you know, for them, it's not worth it to build a couple of duplexes. They to build big projects. So what you get is these larger buildings. And I mean another aspect is this change in building codes and adaptation by builders to it has resulted in this specific kind of building, mostly called the five over one, which is five usually five stories of wood framed building over the bottom floor of concrete, and it can be sometimes it's six over two. Their variants. They're not allowed in New York City, but in other cities and suburbs all across the country. That's the form that most of these buildings are taking. Knew, that's what they were called five over one or six over two. I presume that I prefer to call them stump ees, but that hasn't really fought on. Rents for these buildings are not exactly cheap, and when we're talking about media and rents plus for many of these buildings, they're considered almost luxury buildings. They're often marketed as luxury buildings. I mean mostly that just means stainless steel appliances. They're not it's like they're not that luxurious. It's just that's how you market these things. Very often they're at higher rents than some surrounding buildings. But I think over all the evidences, you build more stuff like this, and it it puts some downward pressure on prices. Now, how do the pandemic affect builders that we're building these apartments, because I guess building was one of the things that didn't really shut down. It kept going out. Yeah, I mean it's shut down for a couple of months in some places, and in some places it didn't at all. I mean, one thing about this is it takes a while to get a large apartment building built. So all these buildings that were being completed in two thousand twenty one, I think the majority of them were actually they got the permits and it was in the works before the pandemic, and there actually was a dip in permits for the first six months or so of the pandemic, but then since late permits of skyrocket, and it looks like if you go by the it takes like nineteen months or so to get one of these buildings built. They're going to set another record in two thousand twenty three, and there are people to live in all of these I guess. So, I mean part of it is, you know that with the lead time, they may be opening all these new buildings into a weak market if there's a recession, but maybe not. I mean, it does seem like for the most part, they're able to fill them all up. You have a great chart here housing apartments issued for Austin round Rock in more than twenty five and a half thousand. But I guess we are seeing a lot of companies build new headquarters in other cities. I mean, Austin's booming, Nashville's booming, Salt Lake cities booming. What's just interesting is that traditionally these booming cities, and this is still true of like Atlanta, Dallas, Houston, the vast majority of that new housing is single family. But increasingly what's happening in even inland metro areas is what's happened a while on the coast, is that almost all the constructions that's happening as apartment buildings because there's either just too much opposition or these places just can't sprawl any farther out. Justin Fox. The House January six committee is several public hearings into its investigation of the attack on the capitol. Seventeen months ago, I spoke with Jonathan Bernstein about what we've discovered so far. We just literally heard that we might actually be getting more hearings than we originally thought because there are new pieces of evidence available to the committee. What's the outlook, Jonathan, what happens after recess? Well, apparently after recess they're going to have at least two more, but they may schedule more after that. And you know, I hate to do and I told you so, but I've been screaming for months that one of the reasons to get to the hearings is because hearings themselves may produce additional evidence. And apparently that's what happened. We spoke about that on this program. At this point, they're really starting to hit a hard deadline because they have to write the report, which is somewhat important, but all they have is the end of this Congress to do it, and we're going into election season. As we get closer to the mid terms, it becomes increasingly difficult for them to put these hearings on without acting as if they are electioneering. And part of the importance of this is to try to appeal to people who will be turned off by electioneering. So there is some suggestion out there, Jonathan, that if there were to be delaying tactics we might reach into the next Congress that would be a different speaker that might change things. I mean is that a possibility. Well, if we assume that Republicans will take over the majority in the next Congress, which certainly seems very likely, it's impossible to imagine basically a Republican majority Congress continuing anything of this stuff. So realistically, they've got till the end of the year, and I think it's unlikely that they'll come back in September and do further public hearings. So really they just have the end of July until the August recess unless there's something so spectacular that they feel they have to do it. They do have the option of coming back in a lame duck session after the election, but again, they have to write a report. So I think that they're really in a time crunch and the impetus will be to get this done. Well, we have had four public hearings, will have x amount more. We have heard from people that were completely anonymous before the hearings. Has the committee done a good job so far? I think given the parameters they set for themselves of having a small number of fearing starting this late, I think that they've done an excellent job. A couple of things, in particular, the restraint the members have shown you know, they're having just the chair and Representative Chaney the vice chair speak in each hearing, but outside of that, just one member is designated to interview entire panels, and in fact, around the Tuesday edition, we had you know, Adam Shift interviewing both panels. Every other member sits there like a stone, doesn't say anything. That's a really hard thing to get members of Congress to agree to do on something which is a major publicity opportunity. The other thing they've done extremely well is using video, using physical evidence, tweets and documents and all that, and coordinating that with questioning in a way that makes the presentations very compelling television. What were the most salient facts uncovered? You know, I think that while there have been some specific facts that have been uncovered, for example, they really emphasized the extent to which people told Donald Trump that he lost the election. So there's been some progress on digging out specifics, but I think what's most important is the overview and telling things, some of which we learned as early as before January six, you know, his call pressuring Georgia officials and other state legislative officials, but putting it all in one piece explaining how all of the different pieces of what Trump and his allies were doing added up to an attempt to, put it bluntly, overthrow the government, which doesn't mean that it's actually going to impact anything in the future when it comes to the former president running again or even having an impact on the primary so far as certainly doesn't seem like there's been any negative influence on the primaries, you know. I mean, Trump has not had a particularly good primary season during these midterm primary but I wouldn't credit the January six investigation particularly. I think it is possible that the events of January six in the first place may have turned some people off from Trump. But I think that what the hearings can do in terms of the audiences that they have some Republicans who may have been willing to go along with Trump but weren't real comfortable with that may be affected. That won't necessarily affect primary elections this year, but long term that may have some consequences for his influence within the party. Um. I think also to the extent that it changes press coverage going forward. The one attentive group is the media itself and people in the media who think of themselves as neutral, pounding it into them that being neutral about these things includes accepting the truth of what Trump actually tried to do. Well. The other thing is, we still don't have firm evidence tying Trump exactly to violence or groups that were violenced that day. Do the details really matter? We still don't have firm evidence tying Trump to violence or groups that were violenced that day. Do the details really matter? They may matter for prosecution and what exactly he can be prosecuted for. One of the audiences here is the Justice Department. And the thing about violence is it's complicated. Right by the time that we get to January six, it's clear that the way Trump talks about things has consequences in terms of violence and threats of violence. And I think it's pretty clear that Trump knew or should have known by this point that his words and the words of his allies had these consequences. Now, for legal purposes, that may not be good enough, but there is something different between that and if there may have been more direct contact between Trump and some of these organized groups. We know, you know that Trump said to one of the organized groups in the national debate, you can't get a more public thing than a presidential debate that they should stand by, you know, when you has to condemn them, so you know, you can draw lines here, but how deeply the lines should be shaded. We still don't know if there's more to come well, and Bennie Thompson has said that there is footage from a documentary and Alex Holder who had access to the Trump family before and after January six, So we don't know what's going to come out of that. What would the Justice Department need more of in order to prosecute Donald Trump? Well, two things. One is do they feel like there's public pressure to move ahead on this without seeming partisan? And again I think that the Attorney General is very hesitant to move forward with anything they could look like a partisan prosecution of a former president and current presidential candidate, and rightly so, he should be very hesitant. It's an impossible conundrum for the Justice Department because it's terrible to move ahead with something that looks like a partisan prosecution, but it's also terrible to let the president get away with crimes. Um. That's yeah. Then there's the legal side of things, which is how open and shut a case do they have on some of these charges, and there's discussion within sort of Upella law, Twitter and bloggers and and columnists about what matters in terms of Trump's state of mind for some of these charges and what exactly is needed to make good these persecutions, because option one of convicting him, an option two of not charging him or bad but options three of bringing him to trial and having him declared not guilty, that's worse. Jonathan Bernstein. They're turning east now and specifically to China, where President she Jin things this week criticized the impact of sanctions for causing global economic pain. Also this week, President she warned of hunger and he ordered more pro growth policies to boost China's COVID mattered economy SHOOTI ran joins Now for some perspective on the Chinese consumer SHOOTI President she sounds concerned about his people. How badly is the Chinese consumer suffering right now? I mean, if you just look at the use unemployment rate at the Periodic Consumer Sentiment survey, it's done though it's on record. Use unemployment has already had eighteen percent. Yes, it's going to kick higher because college graduates are going to graduate in the month. Also, Yes, so we're going to see basically one thing, four or five young people aged between sixteen and twenty four unemployed. How do you think that happened, Julie. We know that inflation hasn't been a problem, but how is unemployment such a problem in China? Well, a lot of it was the big tech at the real estate developer crackdown. I mean, the tech sector employed a lot of people, especially young people, right So that's a big chunk. And also because of the COVID lockdowns, I mean, the big tech companies also hired a lot of gig economy workers, food delivery workers, drivers, And these people don't have any jobs right now. Do they have social security benefits or any kind of income coming in? So very little to be honest, And that's something very interesting about China. Even though it claims to be a communist country, there is very little social security net. And the president, Shimking is definitely not into this notion called the welfare state. He basically hears this ideology called production first and then living next. So what China has done is that they are giving subsidies to factories and say, oh, you know, like if you just keep those workers, we're going to give you some tax rebates, and they're not very many, to be honest. So there's no talk of stimulus check, and there's very little unemployment check, to be honest. I think in twenty twenty about sixty million people lost their jobs, only two million managed to claim unemployment. Wow, that is a serious, serious black mark on the Chinese economy. Now, President season thing, he has an ego, he wants to hold himself upright in the world. How does he allow this unemployment rate continue to be the case? If it's for use, what is it overall? Well, we all urban unemployment is a little bit shy of seventh perment. A lot of it is because if you're like forty fifty year old, chances are your work force their own enterprises and they don't lay off workers, right, So a lot of the tension is into generational young people are struggling, whereas you're forty fifty year old that you're doing a little bit better, but still you will have children for young right, So use unemployment is the biggest problem right now. Presidency has been talking about going easier on the tax sector and also fintech reforms and reforms in other areas, and that the economy is almost ready to incorporate those reforms and allow these companies operate again. Would that be a bright sign for employment. Yes, that would be that's the early stage of perhaps unemployment recovery. We don't have the complete statistics, but just according to surveys, the tutoring sector it used to hire about seventeen percent of fresh college graduates and that actor was completely wiped out because of the tax crackeder. Right, so the government is trying, but it's not going to be like what it used to be. No. You point out that a record ten point eight million college graduates will be fresh out this summer and there are no jobs for them right now. I mean that will lead to social unrest if it continues. Correct. I think that the government is truly very worried. The thing is the way China sees unemployment. For micro workers, they always feel like, okay, you can always go back to your country side, then go far. They would never be worried about micro workers unemployment. They feel like, you know, the land is their employment ultimately. But for young fresh college graduate it's a problem because they're quite educated and they're frustrated, and we have seen what happened in the Middle East and other parts of the world. China is very worried right now. And China has a great reputation in the tech sector in semi conductors in all sorts of areas, and you would have imagined that China would be able to put them to work. Tell us about what you call gold, silver, and copper babies. So Chinese schools can be very harsh. I mean I went through the Chinese from the earlier the Rancors by our great and then divide into gold, silver and copper. So the gold babies they are the ones who can go to Chincha and Baking University and they're the next generation engineers that can design China's world class chips or e D autopaths. And then the copper babies they tend to be micro workers children, so they will do more gig economy work and perhaps lower manufacturing construction work. The big chunk basically we're talking about two thirds now because China's middle class is getting bigger. Are they so called sumer babies? They're okay, students, not stella. But now most of those super babies they are getting college education as well. China's college attendance rate is close to sixty in the US. It's only and these tuber babies, yeah, they don't want to go working factories anymore their parents did. And then they are not good enough to design the next generation the chips, so China didn't know what to do with them. And the all these super babies, they want to go work for their own enterprises or work for the government, but the government is purring back its own employment as well. The government knows it's so easy uploaded to bloaded. Everyone's just sitting around doing nothing. Way, and then the sewer babies. They used to go to the tech sector a lot, and now the tech sector is not hiring because of the crecktown. These are the big problem. Julie ran there By the way you do get in touch, comments and opinions always welcome. I'm at Vonney Quinn on Twitter or email v Quinn at Bloomberg dot net. China's COVID zero approach has been controversial. Communist Party slogans of oak maximum results achieved with minimum cost, but some of that cost is in the form of economic growth. Economists and a Bloomberg Survey forecast GDP will expand at a four and a half percent rate this year, a full percentage point below the official target. There's a wide range of forecasts, though Bank America says in the worst case scenario, were there to be, for example, citywide lockdowns beyond Beijing, growth would weaken to two and a half percent. I chatted with Tim Colpen, who lives in Taipeidi on to weigh the pluses and minuses. So, Tim, the Chinese government has come under a lot of fire for its COVID zero policy, and clearly there's a lot of suffering in China because of it. At the same time, as far as we know, there are far fewer deaths than there have been around the world. How do we measure how good or bad the policy is? You know what one of the toughest things for any national leader, whether it's in in China or the US, or in Australia, in England or Taiwan, is that nobody's really appreciated for the efforts they've done. And you also, now in kind of mid two, you have to look at COVID very differently to early We have amcron which spreads a lot more quickly, and there's debated about whether it's less or more severe, but certainly medical practitioners know how to handle it better, and we've got vaccinations, which makes the impact of it much more mild. And I think the struggle for China is they're still in the early mindset, but we're in a mid healthcare situation, and they believe in COVID zero, whereas other places have lightened up. In a fact of just across the waters in Taiwan, where I'm based, Taiwan is basically given up on COVID zero. They're not too worried about it, whereas they stuck to COVID zero until earlier this year, and healthcare authorities in Taiwan basically felt, well, you know, we're mostly vacts, more than vacts, and quite a little high booster rate, and so we're willing to ease up and accept the trade off of more freedom to move around and so forth, while still keeping masking policies. For example, in Taiwan. China is not willing to do that, and that's the decision they've made, and it's impacted the way Chinese people view the government. Well, that's just the thing. Will it backfire on season ping? It does seem that people have got a little more vocal than you might have expected Chinese people to get. And yeah, yeah, I think there's a misunderstanding that, you know, Chinese people are all very compliant and do whatever the government tells them. It's it's really not the case. You know, in private discussions and even on social media, people have very strong opinions about the government, but they're also very aware of kind of how far they can push it, and they're aware of the consequences if if they see something that's too outlandish, and unfortunately for for Chinese people, those goalposts do move quite a lot. But there is a big difference to the way people felt about the government's handling of Uhan two years ago, when Uhan was locked down in in January, and we saw what happened there, and at that time the government even denied that there was a problem, and we had the doctor who died, who was martyr unfortunately to the cause, who raised the alarm bells and was even criticized by the government for doing so. That is a very different thing to today. Recently in Shanghai, we've seen this lockdown happen. We've seen a large kind of groundswell of backlash, and I think the difference is people believe that the lockdown is not necessary, that COVID zero is not necessary today, whereas they kind of accepted that it might have been necessary in all two years ago. And so what is happening now in China is more and more Chinese people are thinking that this was not necessarily good decision making by the Communist Party in Shanghai, and they feel that maybe there's poor judgment by the central leadership this time, whereas last time they didn't like it, but they kind of understood why it was needed. And that's the real difference. Well, some of the final judgment will depend on the growth figure is a far cry from the five point five percent that the Chinese government had set out as its school. Is that effectively the rest of the world's recession. Yeah, but you know it's it's not a small economy, right, It's the world second largest economy. And so at some point China and the world has to accept that it's not emerging market economy but developed market economy, and you have to really re orient the way you think of the country. But at the end of the day, we love GDP, we large unemployment, inflation, they're the kind of the big three statistics that we look at, but not all GDP growth is created equal, right, So what the Chinese government has to think about is is this going to the right people? And to the Chinese government's credit, they have this new concept of common prosperity. We haven't heard about it as recently in the last few months, it was a big talking point in one But the idea is that all of this growth of China's experienced and all this wealth that's been created in China hasn't been distributed fairly across society, from city to city as well as within the various echelons of society. So if the Chinese government is willing to accept a slower growth rate but it's better distributed, costs are still kept under control, and people still feel they've got a roof over their head, they've got food on their table, they've got stability, then it won't be a problem. However, if that slower growth rate and there is inflation that goes with it, or other issues such as unemployment or housing collapse, things like that, then definitely people are going to be more and more annoyed. And you can't eat statistics, As says my colleagues, Shuly wrote recently, and that's something that I think she jimping will need to remember, and we know that as far back as six months ago. She's only found out about it recently. She's something was warning about the dangers of mass joerlessness. We didn't know that at the time, but it was clearly high up on his priority list that that should not happen. Yes, exactly, and in fact, we've seen an incredible about face in the last six months when they started to realize I guess that, you know, a slowdown was a very real possibility. In remembering we've got, you know, Russia's invasion of Ukraine, which is is definitely a headwind. We've got a rising interest rates and all the other things that are happening around the world, and those will either indirectly or directly impact the Chinese economy. And unemployment is definitely something that's no government wants to see, but certainly in China, if you've got more and more people out of work, they're not going to be happy. So we're seeing these efforts by the government to reduce the economy, and one of those is to implore companies not to know layoff workers to to keep unemployment under control because that definitely has an impact on first order and second order effects on the economy. But then there's the danger of the Japan model, where you have people employee just for employment's sake, and that's not good long term for an economy either. That is you know what you're right, There is definitely concern that there could be kind of a lost decade like Japan has faced, and that's something the government needs to focus on. Is surely aware of. We've gone through this incredible cycle of innovation in China over the last ten twenty years and they want more of that innovation now. The last ten or fifteen years of that has been very much the internet economy, Ali Barber ten cent by Do is not where it used to be, but JD dot Com, Matwin, all these companies that are coming forward. The platform economy is really what it's called. Has brought a lot of innovation employers, a lot of people not just as coders and programmers, but it's allowed people to be you know, delivery drivers and all sorts of other things. People can be merchants from their own home selling stuff online, and so that's been a very very innovative part of the economy. It's been very important to the Chinese growth over the last decade. But China decided they want to crack down on that. They didn't want these platforms to have as much power, and they started cracking down and limiting the way these companies could use their power, their data, their user base kind of further themselves. So I think the real challenge there is for China to balance these issues of allowing these companies to still grow and innovate, but also kind of holding them back, reining them in so they don't have too much power. And by raining them in too much, they could really risk the possibility that economic growth will suffer as a result. And these are the companies that are hiring and hiring well paid workers, and we do seem to be seeing a small burbon about face. So the clampdown is just easing, very very slightly. I do want to ask you though, about the supply chain issue, because more and more countries are deciding that they need supply chains domestically, they need to not depend on China solely for their own materials. You're right, You're right, that's a big issue, and you don't have to be in anti China cam to realize it's not smart to have all of your product coming from one place, right, whether it's semiconductors which is mostly based in Taiwan the high end level, or electronics manufacturing which is mostly in China, especially southern China, but also around the Shanghai area, and so many other things. You know, textiles are concentrated in some parts of the world. All sorts of things are concentrated in China. And I think because of the Cold War, the tech Cold War, or the neo Cold War, which kind of came to the fore under President Trump, but we're already brewing. People have realized that, wow, we depend on China for a lot of our stuff. And then with COVID and the lockdowns and the problems of getting you know, workers into factories, and now the bigger problem is not so much factories, but the logistics trucks being able to go from city to city ports, being able to load and unload their cargo. We now realize what we really are stuck with China, and governments and corporations are wisely waking up to that idea and realizing that maybe we need to onshore again of course that then allows those who have a nationalistic meant to say, hey, we have to have it made in made in America, or made in England, made in Europe, made in Japan, made in Australia, as if somehow that is a solution to the problem. So we'll probably see a whiplash where it will go too far and we'll have probably overexpansion and over investment in production capacity in say the US or in Europe, and then maybe, you know, fifteen years after that it might balance again. But certainly were in this reshoring or on shoring phase and it's definitely got a lot of political backing behind Tim Culpan there. We're now choosing to end all conversations not with you, though as always we love to hear from you. I'm at Bonny Quinn on Twitter or send your assaults to ve Quinn at Bloomberg dot net. We're produced by Eric mollow Till next time on Bloomberg Opinion.