The Mortgage Press Gauge May 2009: Part I – NMP Skip to main content

The Mortgage Press Gauge May 2009: Part I

National Mortgage Professional
Mar 24, 2014

The Mortgage Press Gauge May 2009: Part IDavid Beadlemonthly payroll report, Bureau of Labor Statistics, consumer debt obligations, Federal Open Market Committee

Provided exclusively to The Mortgage Press by David Beadle, president of BestInfo Inc., the BestRates cell, pager and e-mail rate alert service for mortgage industry subscribers. Send your inquiry to [email protected] for full details on a free two-week trial subscription.

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.

Mar 24, 2014