Weekly Economic Summary

Weekly Economic Summary

September 11, 2013

Last Week in Review 
Table Source: Mortgage Success Source

The Jobs report for August didn’t show much encouragement for workers as the Labor Force Participation Rate, which measures the number of people who are either employed or are actively looking for work, fell to its lowest level in 35 years. Job creations were also lower than expected, with 169,000 jobs created in August versus 177,000 expected. Many of these jobs were in the retail and leisure sectors. Compounding this number, job creations for June and July were revised lower, removing 74,000 jobs from the previous reports.

The unemployment rate did drop to 7.3 percent, the lowest level since December 2008. However, this number was likely lowered by people leaving the labor force rather than organic job growth. It’s also important to note that outplacement firm Challenger, Gray & Christmas said that planned layoffs surged by nearly 40 percent from July to August, reaching the highest level in six months. 

In housing news, research firm CoreLogic reported that home prices rose 12.4 percent on a year-over-year basis in the month ended in July. This marks the seventeenth consecutive month of year-over-year price gains. Home prices still remain 17.6 percent below their peak levels, which were set in April 2006. 

What does this mean for home loan rates?

Weak economic reports can often cause investors to move money out of stocks and into safer investments like bonds, including mortgage bonds to which home loan rates are tied. We saw some of that dynamic late last week, as bonds improved after the weak Jobs Report.

The Fed has said that economic data will be a key factor in when it begins tapering the $85 billion in bond purchases it has been making each month to stimulate the economy and housing market. These purchases have helped home loan rates remain attractive. With economic conditions still wobbly and the housing recovery fragile, the Fed will be watching upcoming economic reports closely. 

Home loan rates remain near historic lows, meaning now is a great time to consider a home purchase or refinance. Forecast for the week

The economic data doesn’t begin until late in the week, with several key reports due out on Friday. 

  • As usual, weekly Initial Jobless Claims will be released on Thursday. Despite the poor Jobs Report for August, claims have been hovering near 6-year lows.  
  • Friday brings the Producer Price Index (which measures inflation at the wholesale level), Retail Sales and Consumer Sentiment.

As you can see in the chart below and as mentioned above, CoreLogic reported that its Home Price Index, which includes distressed sales, showed a year-over-year increase of 12.4 percent in the month ended in July. The index rose 1.8 percent from June to July. CoreLogic also said that it expects a 12.3 percent rise in the index on a year-over-year basis in August. Housing data will be a key factor in the Fed’s decision regarding when to taper its bonds purchases.

Chart: CoreLogic Home Price Index

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