John’s Finance Corner: Economic Update 1st week of November
Last week brought a mixed bag of data, resulting in a higher 10-year treasury bond and mortgage rates. This week, we anticipate more critical data and events that could provide answers about the direction of the market and rates.
The BLS jobs report released on Friday showed only 12,000 jobs were created in October, well below the expectations of 112,000 new jobs. Not only was the headline number lower than expected, but the Household Survey also revealed 368,000 job losses. This figure is often considered more reliable because it comes from calling households, while the business survey is based on models and estimates. The Household Survey showed a loss of 164,000 full-time jobs and 227,000 part-time jobs last month. The unemployment rate remained at 4.1%, the same as last month. Statistically, you would expect the unemployment rate to increase, but the report does not include people who have stopped looking for employment, which can influence the final number.
The Fed’s favorite measure of inflation, Personal Consumption Expenditures, showed inflation rose 0.2% from August, while the year-over-year reading fell from 2.3% to 2.1%. The Core reading (the Fed’s favorite data point) rose 0.3% month-over-month, and the yearly number stayed at 2.7%, hovering around the lowest level in three years.
Pending home sales, which are signed contracts on existing homes, rose 7.4% in September, the highest level since March. The increase in sales was largely due to lower interest rates over that period and additional inventory available to the market.
Mortgage bonds surprisingly struggled to end the week, pushing mortgage rates to levels not seen since the beginning of July. Investors have been concerned about the amount of debt the government holds and continues to accumulate. The uncertainty of the upcoming election has also caused some fear in the markets. This week is critical for bonds and rates. The election could influence investors. The Fed meets this week, and it is largely expected that they will cut the Fed Fund Rate by a quarter percent. The Fed Fund Rate is a short-term, overnight lending rate that banks use to borrow and lend money. It does not have a direct impact on mortgage rates, as seen in September. Expect the markets to be rather volatile this week, with the hope that things will settle down moving forward, providing a clearer path and direction for where the economy and country are headed.
Stay tuned for more updates as we navigate these uncertain economic waters together.
John Lamberg
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