Business and Hiring Remain Strong

January 08, 2019

The NFIB Small Business Optimism Index was essentially unchanged in December just below record highs at 104.4. The NFIB said that unfilled jobs and the lack of skilled qualified applicants continue to be the primary driver of the frothy index, with job openings setting a record high and job creation plans strengthening. “Optimism among small business owners continues to push record highs, but they need workers to generate more sales, provide services, and complete projects,” said NFIB President and CEO Juanita D. Duggan.

The JOLTS report (Job Openings and Labor Turnover Survey) showed that there were 6.9 million job openings at the end of November, just below record high of 7.1 million set back in August, strengthening the data from the NFIB. Job openings increased in transportation, warehousing, and utilities while declines were seen in other services and construction. The December Jobs Report showed a whopping 312,000 new workers were hired as the labor market continues to move to greener pastures.

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Home prices nationwide jumped|Mortgage rates last week of 2017

January 02, 2018

CoreLogic reports that home prices nationwide, including distressed sales, jumped 7% from November 2016 to November 2017 and increased 1% month over month from October to November. Looking ahead, price gains are expected to cool a bit as CoreLogic sees a 4.2% increase from November 2017 to November 2018. CoreLogic’s chief economist, Frank Nothaft, said, “Growing numbers of first-time homebuyers find limited for-sale inventory for lower-priced homes, leading to both higher rates of price growth for starter homes and further erosion of affordability.”

Online real estate database company Zillow reports that the total value of all U.S. homes in 2017 was $31.8 trillion. The top cities for value were Los Angeles at number one worth $2.7 trillion followed by New York at $2.6 trillion. The $31.8 trillion is more than 1.5 times the Gross Domestic Product (GDP) of the U.S. and approaching three times the size of China’s GDP. In 2017, renters spent a record $485.6 billion with renters in New York and Los Angeles spending the most.

The last week of 2017 saw mortgage rates hit a five-month high though still below the rates seen at the end of 2016 and early 2017. Freddie Mac reported last Thursday that the 30-year fixed-rate mortgage hit 3.99% with an average 0.5 in points and fees. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.

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Pending Home Sales | Consumer confidence retreated | How the “Other half” lives

December 27, 2017

Pending home sales squeaked out a minor gain in November on a monthly and annualized basis, according to the National Association of REALTORS® (NAR). The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 0.2 percent to 109.5 in November from 109.3 in October. The index remains at its highest reading since June (110.0), and is now 0.8 percent above 2016. The 3.4-month supply of existing homes for sale on the market is the lowest since NAR began tracking inventory in 1999. A 6-month supply is considered normal. Heading into 2018, existing-home sales and price growth are forecast to slow, primarily because of the altered tax benefits of homeownership affecting some high-cost areas.

Consumer Confidence retreated in December after reaching a 17-year high in November. The Consumer Confidence Survey® monthly report reflects prevailing business conditions and likely developments for the months ahead and details consumer attitudes and buying intentions. The decline was fueled by a less optimistic outlook for business and job prospects in the coming months. Despite the decline in confidence, consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018.

And now for how the “other half” lives. The world’s wealthiest became $1 trillion richer in 2017 with a 23 percent increase in fortunes from 2016, bringing their cumulative total to $5.3 trillion. That’s according to the Bloomberg Billionaires Index, a daily ranking of the world’s 500 richest people. The increase was more than four times last year’s gain. Inc. founder Jeff Bezos added the most in 2017, a $34,2 billion gain that knocked Microsoft Corp. co-founder Bill Gates out of his spot as the world’s richest person, which he’s held since May 2013. The U.S. has the largest presence on the index with 159 billionaires. China has 38 billionaires on the index, a 65 percent increase that marks the biggest gain of the 49 countries represented. Tech moguls number 57 billionaires on the index, the most of any sector.

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U.S. Stocks rebounding this AM, Optimism in Manufacturing, Net Neutrality

December 15, 2017

U.S. Stocks are rebounding this morning as tax bill concerns out of D.C. wane. The closely watched S&P 500 stock index declined the most in a month on Thursday after Republican Senators Marco Rubio and Mike Lee declined to back the tax bill without changes to child tax credits. Stocks have rallied in 2017 due in part to tax cuts that were promised by President Donald Trump.

Business activity continued to grow at a strong pace in New York State, as reported by firms responding to the December Empire Manufacturing Index. The index hit 18 this month, matching analysts’ estimates. Within the report it showed that new orders and shipments remained strong, while labor market indicators pointed towards a small increase. Looking ahead, firms remained optimistic about the six-month outlook.

Net neutrality? Those two words continue to make headlines on a daily basis, but just what is it? Net neutrality is the concept that all data on the internet should be treated equally by corporations, such as internet service providers and governments, regardless of content, user, platform, application or device. Network neutrality requires all internet service providers (ISPs) to provide the same level of data access and speed to all traffic, and that traffic to one service or website cannot be blocked or degraded, as described by Investopdia.

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Inflation tame |Fed Funds rate should rise | Mortgage rates unchanged

December 13, 2017

Inflation at the consumer level was somewhat tame in November, due in part to weak healthcare costs and a big drop in apparel prices. The Labor Department reported that the Consumer Price Index (CPI) rose 0.4% in November from October, which was inline with expectations. When stripping out volatile food and energy, the more closely watched Core CPI rose 0.1%, below the 0.2% expected. Year over year, Core CPI fell to 1.7% from 1.8%.

The Federal Reserve Bank of the U.S. is expected to raise the short term Fed Funds Rate when the Fed meeting ends later this afternoon. The Fed Funds Rate should rise by 0.25% to 1.50%. The Fed Funds Rate impacts interest rates for car loans, credit cards, small business loans and home equity lines of credit. The Fed Funds Rate is the interest rate in which banks lend their balances held at the Federal Reserve to other banks on an overnight basis.

The Mortgage Bankers Association (MBA) reports that mortgage rates were essentially unchanged in the latest week as 2017 comes to a close. The average contract rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) rose to 4.20% from 4.19% with an average point of 0.39. The MBA also reports that the refinance share of applications fell 3.0% while the purchase index decreased 1.0%.

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Fed Funds Rate is expected to rise | Rising home prices across U.S.

December 11, 2017

The two-day Fed meeting kicks off on Tuesday and ends Wednesday with the 2:00 p.m.ET release of the Fed statement. Fed Chair Yellen will hold a press conference immediately following the release at 2:30 p.m. ET in what will be her last as Fed Chair. The Fed Funds Rate is expected to rise by 0.25% to 1.50%. The statement could reveal more rhetoric on the Fed’s balance sheet and will reveal the current state of the economy. The Fed statement always carries a big headline risk.

Rising home prices across the U.S. lifted many underwater mortgages into positive equity between the second and third quarters of 2017. Analytics firm CoreLogic reports that 260,000 mortgaged properties regained equity between the second and third quarters of 2017. CoreLogic Chief Economist Frank Nothaft said, “Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years. This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.” Negative equity means your home’s current fair market value is less than your outstanding loan balance (i.e you owe more on your home than it’s worth).

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Tax bill might make it, CVS to purchase Aetna, Shopping this weekend was highest ever

December 04, 2017

The Senate passed its version of the tax bill over the weekend and now the House and the Senate will reconcile their respective versions of the tax bill before it becomes a law. The news has sent U.S. Stocks considerably higher to begin the week now that the uncertainty surrounding taxes has ended. The Stock markets will look ahead to Friday’s Jobs Report for November where it is expected that employers hired 190,000 new workers during the month.

In corporate news, drugstore chain CVS has agreed to purchase health insurer Aetna in a deal that will change the way large company’s purchase health-care benefits. The deal is expected to cost CVS nearly $70 billion and should reduce healthcare costs for consumers, immediately, said the two CEOs of both companies on CNBC this morning. The merger will allow stores to “not be just about products, but also service offerings that can help people on their path to better health,” said the two CEOs.

The National Retail Federation reports that from Thanksgiving Day through Cyber Monday, more than 174 million Americans shopped in stores and online during the five-day holiday weekend, beating the 164 million estimated shoppers from an earlier survey. The most popular day for in-store shopping was Black Friday, cited by 77 million consumers, followed by Small Business Saturday with 55 million consumers. In addition, credit cards are the most popular form of payment this year, used by 40% of shoppers, up from 39% last year. That’s tied with debit cards, which is also used by 40%, the same as last year; 18% plan to pay with cash and 2% will use checks.

Consumers shopping for clothes

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Inflation remained tame, Beige Book economic activity, Mortgage Rates edged lower

November 30, 2017

Inflation remained tame in October. The Fed’s favorite inflation gauge, the annualized Core PCE, rose 1.4% from October 2016, well below the Fed’s 2% target range. Despite low inflation, the Fed is on target to raise rates at next month’s FOMC meeting. Don’t expect many more hikes if inflation doesn’t move higher. Within the report it showed that Personal Spending rose 0.3% in October, below the 0.9% in September.

Yesterday’s Fed Beige Book showed that economic activity continued to increase at a modest to moderate pace in October and mid-November, with a slight improvement in the outlook among contacts in reporting districts. In addition, reports of tightness in the labor market were widespread. The Beige Book precedes the Federal Open Market Committee meeting which will begin on December 12 and end on December 13.

Mortgage rates edged lower this week and remain just above all-time lows. Freddie Mac reports that the 30-year fixed-rate mortgage fell 2bp this week to 3.90% with an average 0.5 in points and fees. Freddie Mac says average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.

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GDP Strong, Pending home sales increased, Automation will impact jobs by 2030

November 29, 2017

Solid economic growth was seen from the second reading on third quarter Gross Domestic Product (GDP) where strong business inventory and equipment investment offset an ease in consumer spending. The second read on Q3 GDP rose 3.3%, up from 3.0% in the first reading. This was the best number since Q3 2014. GDP registered 1.2% in the first quarter of 2017 and 3.1% in the second quarter. Consumer spending fell to 2.3% in the third quarter after hitting 3.3% in the second quarter. GDP is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. It is considered the broadest measure of economic activity.

After a weak reading in September due to hurricanes Harvey and Irma, signed contracts to purchase existing homes surged in October. The National Association of REALTORS® reports that Pending Homes Sales increased 3.5% in October from September, the highest level since June. However, sales were down 0.6% from a year earlier. The South saw the biggest gain of 7.4%, which was most likely due to pent-up demand after the storms subsided.

A disturbing report on the state of future labor market activity was released by McKinsey research this week saying that a large portion of the global workforce could be displaced by 2030. The report estimates that between 400 million and 800 million people could be displaced by automation and need to find work. The professions that are more physical labor will be the most likely to see automation take over such machine operators and preparing fast food. Jobs that involve content providing, managing people and the like would be least impacted. In addition, jobs like gardeners, plumbers and, health care providers – will likely see less automation.

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Home Prices continue to rise | Confirmation hearing incoming Fed Chair Jerome Powell | Consumer Optimism surged

November 28, 2017

Home prices continued to rise in September buoyed by low mortgage rates, an improving economy and a strong labor market. The September S&P/Case-Shiller 20-City Home Price Index rose 6.2% year over year, above the 5.8% registered in August. It was the biggest increase in more than three years. “Most economic indicators suggest that home prices can see further gains,” David Blitzer, chairman of the S&P index committee, said in a statement. “One dark cloud for housing is affordability — rising prices mean that some people will be squeezed out of the market.”

A confirmation hearing for incoming Fed Chair nominee Jerome Powell will take place at 9:45 a.m. ET today but there should be no surprises. Mr. Powell says he expects interest rates to rise somewhat further and the size of the balance sheet to shrink gradually. Mr. Powell is expected to pursue a similar course to outgoing Fed Chair Janet Yellen. Mr. Powell will be the 16th chairman, which dates back to 1914.

Consumer optimism surged in November fueled by a strong labor market. The Conference Board reported that its Consumer Confidence Index hit 129.5 this month, a 17-year high, above the 124.0 expected and up from the 126.2 recorded in October. Those Americans stating jobs are “plentiful” increased from 36.7% to 37.1%, while those claiming jobs are “hard to get” decreased slightly from 17.1% to 16.9%. Lynn Franco, Director of Economic Indicators at The Conference Board said, “Consumers are entering the holiday season in very high spirits and foresee the economy expanding at a healthy pace into the early months of 2018.”

Consumers shopping for clothes

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