Economic Update: Week Ending 9/8/2018

Economic update for the week ending September 8, 2018:

Wages grew at highest pace since 2009 - 201,000 new jobs created in August - The Labor Departmentreported that  the U.S. economy added 201,000 new jobs in August. That number beat analysts expectations and marked the 95th conservative month of job growth. The unemployment rate held steady at 3.9%, a 50 year low. The highlight of the report was that wages grew 2.9% in August from one year ago. That was the highest wage growth since 2009. Wages have been rising at just  2.6% -2.7% for many years. Usually when unemployment is at historic low rates more competition for workers drives wages up. Until August that has not happened. Experts have been baffled at how stubborn wage growth has been with such robust job gains. In January it appeared that wages were finally moving higher, but wages dropped back to rising just 2.6% - 2.7% year over year in the following months until August. In the coming months we will see if this is a trend to higher wages or just a unique one month reading like we saw in January. 

Stocks drop this week - Renewed trade and tariff talk weighed on stocks this week. A robust job and wage  growth report did not cause a rally. With consumer spending accounting for nearly 70% of the economy one would think that higher wages, and consumer confidence at a 18 year high would be encouraging. On the other hand if consumer spending picks up that could cause inflation, which is very low, to pick up. Higher inflation would lead to higher interest rates and increase borrowing costs. 

The Dow Jones Industrial Average closed the week at 25,916.53, down from 25,964.82. last week. It is up 4.8% year to date.  The S&P 500 closed the week at 2,861.78, down from 2,901.52 last week.  It’s up 7.4% year to date. The NASDAQ closed the week at 7,992.54, down from 8,109.64 last week.   It’s up 14.5% year to date. 

Treasury Bond Yields  higher -  The 10-year treasury bond closed the week yielding 2.94%, up from 2.86% last week. The 30-year treasury bond yield ended the week at 3.11%, up  from 3.02%  last week. We watch treasury bond yields because mortgage rates follow bond yields. 

Mortgage rates almost unchanged in September 6 survey, but rates rose after jobs report. Next week’s rates will be higher.  - The September 6, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.54%, almost unchanged from 4.52%  last week. The 15-year fixed was 3.99%, up  from 3.97%  last week. The 5-year ARM was 3.93%, up  from 3.85% last week. 

Economic Update: Week Ending 8/25/18

Economic update for the week ending August 25,2018:

 

Stocks end week at record highs - Longest Bull Market in history - Stock ended the week at record highs, for the first time since January, after Fed Chairman Powell released remarks stating that inflation is tame, and that The Fed no longer fears the economy will overheat and spike inflation. These remarks led investigators to assume he was signing that The Fed was nearing the end of interest rate hikes.  The market also surpassed the bull market of the 1990’s as the longest bull market ever hitting 3,450 days this week. The Dow Jones Industrial Average closed the week at 25,790.35, up from 25,669.33 last week. It is up 4.3% year to date.  The S&P 500 closed the week at 2,874.69, up from 2,850.13 last week.  It’s up 7.1% year to date. The NASDAQ closed the week at 7,945.98, up  from 7,816.33 last week.   It’s up 15.1% year to date. 

Treasury Bond Yields drop  -  The 10-year treasury bond closed the week yielding 2.82%, down from 2.87% last week. The 30-year treasury bond yield ended the week at 2.97%, down from 3.03% last week.

Mortgage rates slightly lower again this week - The August 23, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.51%, down from 4.53%  last week. The 15-year fixed was 3.98%, down from 4.01% last week. The 5-year ARM was 3.82%, down slightly from 3.86% last week. 

New home sales dip in July - The Commerce Department reported that sales of new homes dropped to the weakest pace in nine months in July. New home sales fell 1.7% in July from June’s levels to an annualized rate of 627,000 sales. Analysts expected the number to be closer to a rate of 645,000 sales. Prices increased just 1.8% from last July’s levels. Inventory of new homes for sale also increased to a 5.9 month supply in July. That was up from 5.7 months in June. 

July U.S. Total existing-home sales - The National Association of Realtors reported that the number of sales of previously-owned homes fell for a fourth straight month in July. Existing-home sales which include single-family homes, town-homes, condominiums, and co-ops fell 0.7% in July from June. Year over year sales were 1.5% below last July’s sales pace. That marked the fifth straight month of year over year declines in sales and the slowest pace since 2016. It should be noted that the number of existing- home sales in 2017 was a record number. Home prices continued to increase. The median price paid for an existing-home in July was 4.5% higher than last July. That marked the 77th straight month of year over year price increases. Nationally, housing inventory decreased 0.5% in July. The unsold inventory index stood at a 4.3 month supply, unchanged from last July’s level. 

California existing home sales slow for third straight month in July - Prices higher - The California Association of Realtors reported that existing single family home sales totaled406,920 in July on a seasonally adjusted annualized basis. That was down 0.9% from June and 3.4% below last July’s level when home sales totaled 421,460 on an annualized basis. The state-wide median price paid for a home was $591,460 in July, up 7.6% from last July. On a regional level prices in Los Angeles County rose 5.5%, Orange County prices rose 5.6%, and Ventura County prices rose just 2.1% from July 2017.  Inventory levels continued to increase. The unsold inventory index ticked up to a 3.3 month supply in July, up from 3.2% last July. A normal market has a 6 -7 month supply. Active listings increased for a fourth consecutive month after 33 months of declines, increasing 11.9% from last July. 

 

Economic Update: Week Ending 7/14/18

Economic update for the week ending July 14, 2018:

Stocks up for a second straight week - Stocks rallied again this week as investors expect a robust second quarter profit reporting season. Fueled by tax cuts and a strong global economy, many companies are expected to report double-digit profit growth. Stock markets are now just 3% below their all time highs reached in January. The only thing holding them back is fears of trade wars and tariffs according to analysts. The Dow Jones Industrial Average closed the week at 25,019.41, up from 24,456.58 last week. It is up 1.2% year to date.  The S&P 500 closed the week at 2,801.31, up from 2,759.83.  It’s up 4.8% year to date. The NASDAQ closed the week at 7,825.98, up form 7,688.39 last week.   It’s up 13.8% year to date. 

Treasury Bond Yields mixed this week  -  The 10-year and the 30-year treasury yield ended the week just 0.10% apart. It’s unusual for the 10-year and the 30-year yield to be so close. Usually an investor would want a higher rate when investing for a longer period of time. This tells us that investors may feel that rates will come down in the coming years. The 10-year treasury bond closed the week yielding 2.83%, up  from 2.78% last week. The 30-year treasury bond yield ended the week at 2.93%, almost unchanged from 2.94%  last week. We watch bond rates because mortgage rates follow bond rates. 

30-year mortgage rates unchanged, while shorter term rates were slightly higher this week -  The July 12, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.53%,  unchanged from 4.52% last week. The 15-year fixed was 4.02%, up slightly from 3.99% last week. The 5-year ARM was 3.86%, up from 3.74% last week.

Economic Update: Week Ending 5/31/18

Economic update for the month ending May 31, 2018:

Employers add 223,000 new jobs in May - Unemployment rate drops to 3.8% - The Department of Labor Statistics reported that U.S. employers added 223,000 new jobs in May. That exceeded the 190,000 that analysts expected. The unemployment rate dropped to 3.8%, the lowest reading since 2000. The unemployment rate has steady declined from its peak of 10% in 2009. Average hourly wages grew 2.7%  from May 2017. 

California added 39,300 jobs in April and unemployment dropped to a record low  - The Employment Development Department reported that 39,300 new jobs were created in April. The statewide unemployment rate dropped to 4.2%. 

Stock markets higher in May despite huge daily swings - It was a crazy turbulent month for stocks with daily swings in the DOW of as much as 450 points, yet stocks ended the month higher. Major news included the announcement of tariffs against China, followed by an announcement that a deal was in place and tariffs were on hold, followed by an announcement of even more tariffs just one week later. In the closing days of the month tariffs were placed on steel and aluminum imports from Canada, Mexico and The European Union. China, Canada, Mexico, and The EU retaliated with tariffs on U.S. goods. These on and off again trade wars caused  stocks to fluctuate sharply. The Fed also released a statement that  led investors to believe they were not as hawkish on raising interest rates as many had felt. That was well received. The Dow Jones Industrial Average closed the month at 24,415, up from its April 30, 2018 close of 24,163.  The S&P 500 closed the month of May at 2,795, up from its April 30, 2018 close of 2,648. The NASDAQ closed the month at 7,442, up form its April 30 close of 7,066.  

Treasury Bond Yields lower at the end of May  - The 10 year treasury bond closed the month yielding 2.83%, down from 2.95% on April 30, 2018. The 30-year treasury bond yield ended the month at 3.00%, down from 3.11% on April 30. We watch bond rates because mortgage rates follow bond rates. 

Mortgage Rates end month almost unchanged  -  Mortgage rates spiked in May, but they settled back down in the last week of May, to end the month just slightly higher. The May 31, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.56%, almost unchanged from 4.55%  on May 3, 2018. The 15 year fixed was 4.06%, up slightly from 4.03% on May 3.  The 5-year ARM was 3.80% up from 3.69% on May 3. 

U.S. existing home sales pace slows and prices increase in April - The National Association of Realtors announced that the number of sales of existing homes nationwide dropped 1.6%  on a year over year basis in April. It should be noted that U.S. existing home sales were at record levels in 2017, so even with a slight drop, although not optimal, sales numbers are still at a robust level. Prices continued to increase. The median price paid for a home nationally was up 5.3% from last April, the 74th straight month of year over year increases. The number of existing homes for sale were 6.3% lower than last April. The unsold inventory index nationwide had a 4 month supply of housing available for sale, down from a 4.2 month supply last April. That was the 42nd straight month of year over year inventory level declines. The western region of the U.S. showed even better results. Sales for the western region were down just 0.8% year over year and the median price was 6.8% higher than last April. 

California existing home sales and prices increase in April - The California Association of Realtors reported that total existing home sales totaled 416,790 in April, on a seasonally adjusted annualized rate, that was2.2% higher than last April's sales rate. Prices continued to increase. Statewide the median price paid for a home was $584,460, up 8.6% from  April 2107. Local markets posted varying gains. In Los Angeles County, the median price paid for a home was up 10.1% from last April.  The median price in Ventura County increased just 4.7% year over year. The Orange County median price gained 5.5%Inventory levels rose 1.9% in April marking the first rise in three years. The unsold inventory index in April had a 3.2 month supply of homes, up from a 2.9 month supply in  March, but still lower than a 3.3 month supply in April 2017. 

Housing Affordability index rises in first quarter of 2018 - The California Association of Realtors reported that 31% of home buyers could afford to purchase a median-priced existing single-family home in California in first-quarter of 2018. That was up from 29% in the fourth quarter of 2017. Year over year affordability was down slightly. The index stood at 32% in the first quarter of 2017.

Economic Update: Week Ending 5/26/18

Economic update for the week ending May 26, 2018:

Stocks higher this week - Stocks soared on Monday after an announcement that The U.S. and China would hold off on imposing any new tariffs. It was first reported that China had agreed to encourage purchases of U.S. goods in order to reduce the trade imbalance between the two countries. Throughout the week it became apparent that there was no actual deal in place and stocks gave up much of their gains from the beginning of the week. Interest rates dropped after minutes were released from the May Federal Reserve meeting in which they made statements reiterating that interest rate rises will remain gradual.  This year a new Fed Chairman was appointment and almost half of the voting members have been replaced. Investors speculated that the new makeup of the Fed leaned towards more aggressive increases. The minutes from the May meeting calmed investors and bond and mortgage rates dropped. The Dow Jones Industrial Average closed the week at 24,753.08, up from last week’s close of 24,715.09. It is up 0.1% year to date. The S&P 500 closed the week at 2,721.23, up from 2,712.97 last week.  It's up 1.8% year to date. The NASDAQ closed at 7,433.85, up from 7,354.34 last week. It is up 7.7% year to date.

Treasury Bond yields drop this week - The 10 year treasury bond closed the week yielding 2.93%, down from 3.06% last week.The 30-year treasury bond yield ended the week at 3.09%, down from 3.20% last week. 

Mortgage Rates higher this week - The May 24, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.66%, up from last week’s 4.61% The 15 year fixed was 4.15%, up from 4.08% last week. The 5-year ARM was 3.87% up from 3.82% last week.Rates dropped Thursday and Friday so next week’s rates will be lower. 

U.S. existing home sales pace slows and prices increase in April - The National Association of Realtors announced that the number of sales of existing homes nationwide dropped 1.6% on a year over year basis in April. It should be noted that U.S. existing home sales were at record levels in 2017, so even with a slight drop, although not optimal, sales numbers are still at a robust level. Prices continued to increase. The median price paid for a home nationally was up 5.3% from last April, the 74th straight month of year over year increases. The number of existing homes for sale were 6.3% lower than last April. The unsold inventory index nationwide had a 4 month supplyof housing available for sale, down from a 4.2 month supply last April. That was the 42nd straight month of year over year inventory level declines. The western region of the U.S. showed even better results. Sales for the western region were down just 0.8% year over year and the median price was 6.8% higher than last April. 

California added 39,300 jobs in April and unemployment dropped to a record low  - The Employment Development Department reported that 39,300 new jobs were created in April. The statewide unemployment rate dropped to 4.2%. 

Housing Affordability index rises in first quarter of 2018 - The California Association of Realtors reported that 31% of home buyers could afford to purchase a median-priced existing single-family home in California in first-quarter of 2018. That was up from 29% in the fourth quarter of 2017. Year over year affordability was down slightly. The index stood at 32% in the first quarter of 2017. 

Economic Update: Week Ending 5/19/18

Economic update for the week ending May 19, 2018:

California existing home sales and prices increase in April - The California Association of Realtors reported that total existing home sales totaled 416,790 in April, on a seasonally adjusted annualized rate, that was 2.2% higher than last April's sales rate. Prices continued to increase. Statewide the median price paid for a home was $584,460, up 8.6% from  April 2107. Local markets posted varying gains. In Los Angeles County, the median price paid for a home was up 10.1% from last April.  The median price in Ventura County increased just 4.7% year over year. The Orange County median price gained 5.5%Inventory levels rose 1.9%in April marking the first rise in three years. The unsold inventory index in April had a 3.2 month supply of homes, up from a 2.9 month supply in  March, but still lower than a 3.3 month supply in April 2017. 

Stocks lower for the week - Higher interest rates and renewed trade talks put pressure on stocks this week. Oil prices reached a three year high which some believe will spark inflation levels and cause the Federal Reserve to raise rates more swiftly. At the same time the dollar straightening to a 5 month high. That makes imports less expensive and lowers inflationary pressure. We will have to wait and see.  Experts are mixed on whether bond rates have topped out for the year. The 10 year treasury bond yield topped 3% this week, and hit 3.11% at one point before dropping back. Higher interest rates increase corporate borrowing costs, which lowers profits. The Dow Jones Industrial Average closed the week at 24,715.09,  down from last week’s close of 24,831.17.  It is unchanged year to date. The S&P 500 closed the week at 2,712.97, down from 2,727.72 last week.  It's up 1.5% year to date. The NASDAQ closed at 7,354.34, down from 7,402.88 last week. It is up 6.5% year to date.

Treasury Bond yields slightly lower this week - The 10 year treasury bond closed the week yielding 3.06%, up sharply from 2.94% last week.The 30-year treasury bond yield ended the week at 3.20%, up from 3.10% last week. 

Mortgage Rates higher this week - The May 17, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.61%, up from last week’s 4.55%. The 15 year fixed was 4.08%, up from 4.01% last week. The 5-year ARM was 3.82% up from 3.77% last week. 

Economic Update: Week Ending 5/5/18

Economic update for the week ending May 5, 2018:

 

April unemployment rate lowest since 2000 - The Department of Labor Statistics reported that U.S. employers added 164,000 new jobs in April. That was a little below the 190,000 that analysts expected. The unemployment rate dropped to 3.9%, an 18 year low. The unemployment rate has steady declined from its peak of 10% in 2009. Average hourly wages grew just 2.6% from April 2017. This was the most anticipated part of the report. Wage growth has been stagnant, which is unexpected. Usually when the unemployment rate drops there is more competition for workers and wages rise. That has not happened at the rate expected over the last 9 years. In January wages finally began showing signs of rising when year over year wage growth came in at 2.9% which surpassed analysts. Interest rates began to rise because experts felt that higher wages would give people more spending power and lead to higher inflation. Higher inflation causes interest rates to rise. Stocks slipped because higher wages raise corporate labor costs, and higher interest rates raise their borrowing costs, which lowers profits. It is beginning to appear that January’s wage gain of 2.9% may have been an atypical result, as February and March numbers showed that wages grew 2.7% and April is now back to a 2.6% year over year wage gain. 

Stocks end week mixed in another turbulent week of trading - Despite a rally on Friday where the DOW gained 332 points, stocks finished the week mixed. Companies reported strong third quarter earnings, but gave more cautious guidance on future profit increases. Companies expressed more caution because of increased costs of steel and aluminum due to tariffs, increased energy costs (oil prices have increased dramatically), higher interest rates and borrowing costs, and higher wages and labor costs. Friday’s jobs report revealed that wage increases are back to the levels we saw in 2016 and 2017, and not the wage increase levels we had seen at the beginning of 2018, which investors feel will lower pressure on interest rates increases. Stocks rose sharply on Friday after the jobs report was released. The Dow Jones Industrial Average closed the week at 24,262.51, down from last week’s close of 24,311.19. It is down 1.8% year to date. The S&P 500 closed the week at 2,663.42, almost unchanged from 2,669.91 last week.  It's down 0.4% year to date. The NASDAQ closed at 7,209.62, up  from 7,119.80 last week. It is up 4:4% year to date.

Treasury Bond yields higher this week - The 10 year treasury bond closed the week yielding 2.95% almost unchanged from 2.96% last week.The 30-year treasury bond yield ended the week at 3.12%, slightly downfrom 3.14% last week. 

Mortgage Rates slightly lower this week - The May 3, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.55%, down slightly from last week’s 4.58%. The 15 year fixed was 4.03%, almost unchanged from 4.02% last week. The 5-year ARM was 3.69%, down from 3.74% last week. Rates were slightly lower in Friday so next week’s rates could be slightly lower. 

California’s GDP figures makes it the worlds fifth largest economy - Data released by the Commerce Department showed that California’s GDP exceeded $2.7 trillion in 2017. Only the United States, China, Japan, and Germany surpassed the economic output of California. 

Economic Update: Week Ending 4/28/18

Economic update for the week ending April 28, 2018:

 

Stocks lower in turbulent week - It was another wild week for stocks. The Dow dropped 425 points on Tuesday after Amazon reported record profits, but gave guidance that they expected future profits to decrease due to tariffs. The 10 year treasury bond yield rose above 3% for the first time in 4 years, which also hurt the market. On Thursday The Dow gained 238 points as more companies beat profit expectations, and bond yields dropped slightly. A lower than expected first quarter GDP reading on Friday left investors with mixed feelings. Some felt that the economy may be slowing, while others hoped that the slower growth number will keep the Federal Reserve from increasing interest rates at a faster pace. Higher rates were also a drag on the markets this week. The Dow Jones Industrial Average closed the week at 24,311.19, down from last week’s close of 24,462.91.  It is down 1.7% year to date. The S&P 500 closed the week at 2,669.91, almost unchanged from 2,670.14 last week.  It's down 0.1% year to date. The NASDAQ closed at 7,119.80, down from 7,146.13 last week. It is up 3.1% year to date.

Treasury Bond yields higher this week - The 10 year treasury bond closed the week yielding 3.00% up from 2.96% last week.The 30-year treasury bond yield ended the week at 3.18%, up from 3.14% last week. 

Mortgage Rates higher this week - The April 26, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.58%, up from last week’s 4.47%. The 15 year fixed was 4.02%, up from 3.94% last week. The 5-year ARM was 3.74%, up from 3.67% last week. Rates were lower at the end of the week, so next week’s rates should be slightly lower. 

First reading of the first quarter Gross Domestic Product weaker - The Commerce Department reported that their first reading of the first quarter GDP grew at just a 2.3% annualized rate. The economy was dragged down by sluggish consumer spending which grew by just 1.1% for the first quarter of 2018. That was the slowest pace since the second quarter of 2013. Economists expect growth to pick up in the second quarter. 

U.S. home sales and prices higher in March - The National Association of Realtors reported that existing home sales increased 1.1% in March from February levels, but were down 1.2% year over year from last March’s sales numbers. Existing home sales include all 1-4 unit single family homes, condominiums, town-homes, and coops. The median price rose on a year over year basis for the 73rd straight month, increasing 5.8% from one year ago. The unsold inventory level was at a 3.6 month supply of homes for sale, down from a 3.8 month supply one year ago. Inventory levels have fallen year over year for 34 straight months. 

Economic Update: Week Ending 4/21/18

Economic update for the week ending April 21, 2018:

Stock markets up for second straight week - Stocks ended the week higher again as first quarter corporate profits began to be reported. Profits were stronger than expected and stocks rose. Profit season was a welcome relief to investors as it seems to distract from almost two months of uncertainty caused by trade and tariff fears, and political turmoil. While fears of a trade way still remain, as well as the prospects of higher interest rates, investors remain bullish. They feel that the tax cuts, and increased spending will keep the economy strong through 2018 and 2019. The Dow Jones Industrial Average closed the week at 24,462.91, up from last week’s close of 24,306.14. It is down 1% year to date. The S&P 500 closed the week at 2,670.14, up from 2,656.39 last week.  It's down 0.1% year to date. The NASDAQ closed at 7,146.13, up from 7,106.55 last week. It is up 3.5% year to date.

Treasury Bond yields sharply higher this week - The 10 year treasury bond closed the week yielding 2.96% up from 2.82% last week.The 30-year treasury bond yield ended the week at 3.14% up from 3.03% last week. 

Mortgage Rates higher this week - The April 19, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.47%, slightly above  last week’s 4.44%. The 15 year fixed was 3.94%, up from 3.87% last week. The 5-year ARM was 3.67%, up from 3.61%  last week. Rates were higher at the end of the week, so next week’s rates will be higher. 

California home sales up slightly - Home prices show year over year double digit increases in Los Angeles - The California Association of Realtors reported that Existing, single-family home sales totaled 423,990 in March on a seasonally adjusted annualized rate. That represented a 1.6% increase from last March’s sales pace.

The median price of a home in March in California was $565,830, up 8.9% from March 2017. The median price in Los Angeles County rose 13.6% year over year from last March. It was the fourth straight month of double digit year over year increases. Ventura County showed the smallest year over year increase in the state with the median price growing just 1.8%Inventory levels statewide remained at historic lows. 

The unsold inventory index dropped to a 2.9 month supply in March, down from a 3 month supply in March 2017. This historic low inventory is pushing prices higher.