Analysis: Will Inflation Fix Itself?​​​
The Fed, as expected, raised interest rates yesterday, by a quarter of a point. It is the start of what will most likely be a monthslong, if not yearslong, campaign to tame the worst bout of inflation in decades without damaging the economic recovery that the central bank’s efforts during the pandemic helped foment, according to an analysis in the New York Times. A “soft landing” won’t be easy. To slow rapid price rises, Fed officials are preparing to raise rates six more times this year and five times in 2023, according to their official projections (which, of course, could change). That would be three more in total than its previous cycle of rate increases, from 2015 to 2018, in roughly half the time. Nonetheless, Fed Chair Jay Powell stressed that the economy was strong enough to absorb higher rates, which could slow spending and investments by raising borrowing costs. “The probability of a recession within the next year is not particularly elevated,” Powell said. Is the Fed painting too rosy a scenario? In a revised economic forecast, also released yesterday, the central bank predicted that inflation would be markedly higher than previously expected and that growth would be slower. That combination is usually bad for the labor market, but the Fed also predicted that unemployment would remain historically low. The Fed’s preferred gauge of inflation is running at just over 6 percent, and the official forecasts expect it to fall closer to 4 percent by the end of this year. A good deal of that drop, though, comes not from higher interest rates, but from the expectation that supply chain problems will fade, even as the war in Ukraine and pandemic lockdowns in China threaten to snarl trade.

Analysis: Big Law’s Soaring Profits May Be Next to Falter​​​
What goes up must come down. It’s a lesson seemingly every financial asset is reminding us lately. So many early “pandemic darlings” — Netflix, Peloton, Zoom — that surged as COVID-19 took hold and people stayed home aren’t looking like they’ve won much of anything, two years later. Now, Big Law profits are next at risk of faltering from record highs, according to a Bloomberg Law analysis. Large firms were always bound to be victims of their own success — and overwork. Now they are facing rising costs and growing economic uncertainty, too. Big Law firms aren’t publicly traded. The closest equivalent the industry has is the annual release of AmLaw’s profits per equity partner. That figure, set to be reported next month, will no doubt show the booming value of holding equity in the world’s most prestigious law firms. Many of the numbers reported by AmLaw so far have been staggering. It’s possible that average profits per partner across the AmLaw 100 could have grown as much as 20% last year. That’s on top of 13% growth in 2020. It’s a huge jump from the more recent trend of 6% profit growth in the previous three years. If profit growth comes in at 20%, the unexpected pandemic boom would have earned the average AmLaw 100 partner about $460,000 more over the last two years than if profits had grown at their longer-term trend line. The average partner will earn $2.68 million in 2021 assuming 20% growth.

Mortgage Rates Hit 4 Percent for First Time in 3 Years​​​
Mortgage rates topped 4 percent this week for the first time in nearly three years — and are expected to keep climbing, the New York Times reported. The rate on 30-year fixed-rate mortgages averaged 4.16 percent for the week through March 17, the first time it exceeded 4 percent since May 2019, according to Freddie Mac. That was up from 3.85 percent a week earlier and 3.09 percent a year ago. Rates have been ticking up thanks to a 40-year high in inflation, which the Federal Reserve is attempting to rein in by raising interest rates. On Wednesday, the Fed raised its benchmark rate by a quarter of a percentage point, the first hike since 2018, and it signaled that six more similarly sized increases were on the way. Mortgage rates don’t move in lockstep with the Fed benchmark; they instead track the yield on 10-year Treasury bonds. That figure is influenced by a variety of factors, including the inflation rate, the Fed’s actions and how investors react to them. “The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year,” said Sam Khater, Freddie Mac’s chief economist.

Homes Earned More for Owners than Their Jobs Last Year​​​
In this booming housing market, many homeowners earned more last year from home appreciation than from their jobs, the Wall Street Journal reported. Zillow Group Inc.’s home value index, which estimates the value of the typical U.S. home, rose 19.6% in 2021 to $321,634, an increase of $52,667 from 2020. That figure was slightly higher than what the median U.S. full-time worker earned, which was about $50,000 last year before taxes, according to Census Bureau data cited by Zillow. That marked the first time that the annual nationwide dollar growth for the typical home value exceeded the inflation-adjusted median pretax income, according to a Zillow analysis, which goes back to 2000. Home values surged last year as low mortgage-interest rates stoked buyer demand and the number of homes on the market remained unusually low. Remote work enabled some households to move from high-cost housing markets to less expensive ones, where they were able to outbid local buyers. Investor purchases of single-family homes also increased. The surge in home prices last year has been a boon to homeowners but has made it more difficult for first-time home buyers to enter the housing market. “The people who are winning the housing bids, typically, are folks who have higher incomes or have the equity from their previous home that they’re able to put forward,” said Nicole Bachaud, an economist at Zillow. “That’s definitely a big challenge, I think, when we consider first-time buyers, renters, people who don’t already own a home and aren’t really benefiting from that equity.” Collectively, U.S. homeowners with mortgages gained more than $3.2 trillion in equity in 2021 compared with a year earlier, according to housing-data provider CoreLogic.

Weekly Jobless Claims Total 214,000, Better than Expected for Tight Labor Market​​​
The U.S. labor market tightened further last week, with jobless claims coming in at the lowest level since the beginning of the year, the Labor Department said Thursday, CNBC reported. Initial filings for unemployment insurance totaled 214,000 for the week ended March 12, better than the Dow Jones estimate for 220,000 and a decline of 15,000 from the prior week. The total was the lowest since Jan. 1 and marked another sign that the market and its 3.8% jobless rate was nearing full employment. The four-week moving average, which accounts for weekly volatility in the numbers, also dropped, falling 8,750 to 223,000. Continuing claims, which run a week behind the headline numbers, fell by 71,000 to 1.42 million, the lowest level since Feb. 21, 1970. For the employment picture, the job situation remains complicated. Despite a strong hiring pace over the past several months, there are nearly 5 million more jobs than there are available workers. That has coincided with a sharp increase in wages and has helped push inflation levels to their highest point since the early 1980s.

Bankruptcy Judgeship Opening Announced for District of Utah​​​
The U.S. Court of Appeals for the Tenth Circuit is seeking applications for a bankruptcy judgeship in the District of Utah. Bankruptcy judges are appointed to 14-year terms pursuant to 28 U.S.C. § 152. The position is located in Salt Lake City and will be available starting Feb. 13, 2023, pending the successful completion of a background investigation. The current annual salary is $205,528. The closing date for applications is May 19, 2022.

ASM Session Spotlight: Real Estate Implications of COVID-19 on Senior Living Business Models

The senior living sector, already stressed prior to the pandemic, has been upended by COVID-19. This panel will discuss the effects that COVID-19 has had on operational and financial performance, business models past and future, and the real estate valuations of senior living facilities. The panel will also identify what in-court and out-of-court alternatives exist, and will highlight adaptive reuse opportunities for owners and operators of these facilities. Participants will learn about the operational and financial ramifications that COVID-19 has wrought on senior living facilities, the various in-court and out-of-court alternatives available to restructure these facilities, and trends in senior living business models. The panelists also will explore various alternative financing options available for distressed businesses, including sale-leaseback and bridge financing, as well as potential adaptive reuse issues and alternatives for facilities that close. Register today for this engaging session and many more!

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