John’s Finance Corner: Navigating the Economic Maze

John’s Finance Corner: Navigating the Economic Maze

Over the last several weeks, we've been bombarded with strong economic data, leading to an increase in treasury bonds and, consequently, higher mortgage rates. The most recent BLS and ADP jobs reports have seen some of the largest seasonal adjustments in decades. These adjustments have led many economists and respected analysts to believe that the recent jobs data is overstating the health and strength of the labor markets. Using normal and historic seasonal adjustments, the ADP report would have shown job losses instead of gains, and the BLS unemployment rate would have risen instead of falling from 4.2% to 4.1%. Manipulating data sends out a false sense of security in the labor markets and, in turn, helps dictate Fed policy, which influences mortgage rates on a daily basis in a negative fashion.

Retail sales numbers came out very strong, showing a 0.4% increase month over month. Similar to the jobs data, a very large seasonal adjustment was also given to the sales data. The adjustment was the second largest in over a decade. Using the same seasonal adjustment as last year, the retail sales data would have resulted in a negative sales report. There is no clear-cut reason or explanation as to why such large seasonal adjustments have been used when reporting recent data. There are many theories and ideas about the reasoning, but nothing factual that can be proven at this time. Certain functions of our government dictate policy and messaging and have shown a history over the last several years of manipulating certain data points to control the narrative needed at certain time periods.

For the week of October 21st-25th, there is not a great deal of technical data coming out. This week, we will see existing home sales, initial and continuing jobless claims, and receive durable goods orders. On the technical side of things, the 10-year Treasury has been climbing ever since the Fed announced their 50 basis-point Fed Fund Rate Cut in September. We are now seeing the 10-year Treasury at levels not seen since the end of July, which in turn has caused mortgage rates to increase, unfortunately. Looking back over the last several years, the middle of October has shown a pattern of higher bond yields and higher mortgage rates, with a nice reduction after heading into November. Let’s hope that continues to happen and the bond markets can make up for the recent losses and help drive mortgage rates down as we head into the winter months.

Stay tuned for more updates as we navigate these turbulent economic waters together.

John Lamberg

Senior Loan Officer

Mobile 727.366.9947

Website ccm.com/john-lamberg

Email [email protected]