Economic Roundup: Week of October 9, 2012

An improving US economic outlook and increased optimism about Europe were unfavorable influences on mortgage rates over the last week. Fed purchases of mortgage-backed securities (MBS) under QE3 helped offset the losses, though. As a result, after several weeks of declines, mortgage rates ended the week just slightly higher.

Friday’s Employment report was the big news last week. Against a consensus forecast of 120K, the economy added 114K jobs in September, but the data from prior months was revised higher by 86K. The Unemployment Rate unexpectedly dropped to 7.8%, the lowest level since January 2009, from 8.1% last month. Average Hourly Earnings, an indicator of wage growth, increased moderately from August. The September report exceeded expectations. This increases future inflationary pressures, which is negative for mortgage rates.

The results for the change in the number of jobs and for the Unemployment Rate are derived from different pools of data, and sometimes the two sources show wide discrepancies in a particular month. The Unemployment Rate is based on a survey of a small sample of households, and it can be extremely volatile, while the Payrolls data is based on information collected from businesses and tends to be more precise. This month, the household survey showed a gain of 783K jobs, which was the highest level since 1983, and far above the increase seen in the Payrolls data. Over longer periods, the two sources generally show similar results, but not necessarily in the short-term.

This week, the Fed’s Beige Book will be released on Wednesday. Import Prices and the Trade Balance will come out on Thursday. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Friday, along with Consumer Sentiment. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

October 10, 2012 by · Leave a Comment

About James

James A. Williamson is currently the Sr VP of Sales Development for Shelter Lending Services (formerly Fairfield Mortgage). James joined Shelter in 1994 and was the company's top Loan Officer in GA for 20 straight years helping over 2500 families finance their homes. James now oversees an incredible group of Loan Officers in Atlanta while further building Shelter's Atlanta business.

Leave a Comment