Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – October 2, 2009

Bonds Have Topped Off, So Rates Have Bottomed Out

America’s Jobs Numbers Look Dismal

All this talk of a recovery from the worst economic crisis since the Great Depression has been confounded by one ugly truth:  The Job Market is getting worse.  The United States lost 263,000 Jobs, when they only expect a 175,000 figure.  It’s worse than August’s 201,000 job loss number, but better than the 304,000 number, from July.  Revisions to the previous months’ numbers were a negative 13,000, to make things worse.  There are 15.1 Million Americans out of work.  That number alone will help keep a lid on higher rates, even in the face of inflationary pressure from an exhausted Mortgage-Backed Securities Government Purchase Program.

Unemployment Rate Rises

The unemployment rate also rose, last month, to 9.8% from a previous month reading of 9.7%.  1 out of every 10 Americans is unemployed.  And those are the numbers that are being tracked!  Breaking it down, categorically, we’re looking at 64,000 Construction Jobs, 39,000 Retail / Trade Jobs, 51,000 Manufacturing Jobs, and a whopping 53,000 Government Jobs Number…all negative. 

Business Roundtable Releases Cold Hard Facts

The Business Roundtable is a collection of CEO’s, around the country, that employ over 10 million people.  They released information this week elating to the fact that only 13% of them plan on doing any increased hiring in the next six months. 

Rates Bottomed Out?

I think we’ve reached a pinnacle, for the time being, anyway.  Mortgage-Backed Securities should have skyrocketed on this horrific employment news.  However, I think the market understands that the well is drying up.  And even though the economy can really only move forward when the labor market starts mending, if there’s nobody around to buy securities, than rates will increase.

Average Hourly Earnings

This is declining as well.  With almost 10% Unemployment, businesses are jumping at the opportunity to pay people more.  Makes perfect sense, and I think that we’ll have to see an increase in Hourly Earnings, before we start to see any recovery of employment statistics and therefore economically speaking.

Rates Movin’ On Up

So, The New York Fed purchased $20 Billion in Treasuries this past week.  We’re at $904 Billion of the $1.2 Trillion allotted for the program.  So, the Fed will now, only purchase every other week, instead of every week.  This should cause a little insecurity in Bonds, and therefore create much volatility and uncertainty, and I think, higher rates.

Beware, The “High’s” of May

We have hit the high’s of May.  Mortgage-Backed Securities moved up, on all of this negative unemployment information, and just bounced right off the high’s of May of this year.  We’ve Topped Out (and therefore, Interest Rates Have Bottomed Out).  Today is an excellent day to lock!

Related Must Reads

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Read Last Sentence Of This Update Regarding Rates In October
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