Lots of meaningful news last week. Heres my recap, and what to expect this week: My Thoughts for the Week of May 5, 2014: Great headlines for the April employment report last Friday, with +288k new jobs and a massive drop in the unemployment rate to 6.3%. Great news for the economy and bad news for interest rates, right? Not so fast. The +288k new jobs is good, and about 75k more than the markets were expecting. But the huge drop in the unemployment rate was due to 800k people deciding they no longer want to work, dropping themselves from the labor participation rate which is now at a 36 yr low. Dig further into the employment report and you’ll see the jobs that are being created are low paying jobs and the avg number of hours worked a week is also declining. First quarter GDP numbers were no bueno as well. Markets were hoping for growth readings in the 2-3% range, but first reports of 2014 Q1 growth came back at a measly 0.1%, almost declining. Yikes. So what does this mean? First off rates are not moving higher on the better than expected job growth number. In fact, by the end of the day Friday after everyone had a chance to really dig into the April employment report, rates moved lower on the news. Jobs are being created but not good jobs. The economy is growing, but not at a healthy rate. The world is a cool place, but tensions still remain high in Eastern Europe surrounding the Ukraine/Russia conflict. These three factors are keeping rates from moving higher, something that will inevitably happen. On the other side of the spectrum, the stock market is bouncing of new all time highs on strong corporate earnings (businesses are running lean and mean while working fewer employee’s harder) and real estate values are climbing. Personal wealth is up and consumer sentiment is improving. Interest rates are trending down a bit and are now at the best levels since early February. Overall, things seem to feel better than the reports show. It’s tough to say how the rest of the year will pan out. Stay tuned greenfrontmortgage/blog/?p=686
Posted on: Mon, 05 May 2014 16:29:39 +0000
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