The Mortgage Press Gauge May 2009: Part IDavid Beadlemonthly payroll report, Bureau of Labor Statistics, consumer debt obligations, Federal Open Market Committee
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A reading of "1" has the lowest impact on rates, while "10"
has the highest. Although carefully verified, data are not
guaranteed as to accuracy or completeness. BestInfo Inc. cannot be
held responsible for any direct or incidental loss or liability
incurred by applying any of the information or opinions in this
feature.
May 8
April Employment Report
Rate Impact: 10
While many analysts have maligned the monthly payroll report as a
lagging indicator which is not an accurate way to gauge the moment
of turnaround in the economy, the preponderance of the evidence
shows that weekly jobless claims are an excellent "real-time"
indicator. Therefore, one cannot dismiss all employment data as
slow to react to changes in the economy. However, it is true that
the monthly employment data do not capture the immediate changing
dynamics in the small business community. That's because the Bureau
of Labor Statistics focuses on large corporate payrolls and has to
wait over a year for small-employer IRS Form 940 information and
equivalent state unemployment compensation returns to complete the
picture via revisions.
May 13
April Retail Sales
Rate Impact: 9
After a surprisingly dismal March result after a stronger January
and February, the question will be whether or not a late Easter
resulted in a return of more robust consumer activity. One theory
has it that the first two months of the year showed resilience due
to what is known as "Gift Card Season." Others believe the economy
took a nose dive in the fourth quarter because shoppers went on
strike but have now returned to buying the basics in what could be
described as an "L" shaped chart pattern. The question is how long
we will bump along the bottom before consumers return to gratuitous
spending. This may depend largely upon the employment picture and
progress in paying off past consumer debt obligations.
May 15
April Consumer Prices
Rate Impact: 6
With the core rate of inflation at 1.8 percent on a year-over-year
basis, the Federal Reserve is not worried about upward price
pressures in the midst of the ongoing recession. That's because the
core rate is within the Fed's "comfort zone" of one percent to two
percent. However, despite what has been described as the worst
downturn since the 1930s, it is rather startling that prices
excluding food and energy continue to hold at stubbornly high
levels. One would have expected them to turn negative. The overall
rate of consumer inflation did fall 0.4 percent on a year-over-year
basis in March for the first negative result since 1955. But on the
assumption that inflation will surge with any recovery, it might be
better if core inflation were launching from zero rather than
almost two percent. Why? Because mortgage rates could vault higher
if the Fed fails to keep a lid on future price pressures.
May 15
April Capacity Utilization
Rate Impact: 7
An often overlooked indicator of great importance to the Federal
Open Market Committee is the Federal Reserve's own monthly data on
the level of capacity utilization. The March results were
stunningly dismal. Total capacity utilization by factories, mines
and utilities fell to 69.3 percent, the lowest mark since record
keeping began in 1967. Manufacturing capacity fell to 65.8 percent,
the lowest since record keeping began in 1948. Generally, the Fed
hikes rates when factory capacity use exceeds 85 percent.
Therefore, the prospects for a protracted period of a near-zero Fed
Funds Rate remains high and the condition of our economy remains
low, at least according to this data series.
