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Friday Market Update: Week of September 4th 2020

Happy Friday, Brian Manning here with the weekly update, let’s get right to it. I can’t believe another month has already gone by and it’s jobs week, so Wednesday of this week and the first Wednesday of every month, we get ADP, so ADP is a large provider of private payrolls and they give us a report every month of new jobs created, these are not government jobs, these are private jobs and the expectation for the month of July was at 1.2 million jobs would have been created and ADP said “Oops! Only 167,000 new jobs were created”. But they revised the month of June.

In the month of June they had originally reported that 2.4 million jobs were created which was a BlockBuster report and they said, “Oh! We messed that up”. It was actually 4.3 million people that had new employment in the month of June that were in the private payroll sector. No idea how you miss almost 2 million people but, but they did.

 

Thursday this week and every Thursday we get unemployment filings. So we had 1.2 million new unemployment claims that were filed in the United States and then we also got some feedback from the Federal Reserve which is really interesting and something we’re going to have to watch. The Federal Reserve currently has an inflation target at 2% and what that means is as the personal consumption expenditure and they look at the quarter rate, so the quarter rate strips out volatile items such as food and energy, so when that PCE rate approaches 2% that’s when the Federal Reserve will start to raise their rates. Well, the Federal Reserve is talking about taking that benchmark and changing it from 2% to 2.5%. So that means that they would not look at raising the Fed Funds rate until the inflation target on the personal consumption expenditure hit 2.5%.

Well, don’t forget, although not important at this present moment in time, inflation is the enemy of bonds and inflation is the enemy of interest rates. So as you start to see inflation go higher and higher and higher and the Federal Reserve not doing anything about it, that means that mortgage rates would rise. That is not the case right now, we’re in an incredibly low rate environment but if they do make this change in the future, when rates do start to move higher that will certainly propel mortgage rates to move even higher because that cap would not be in place at 2%. So we’ll have to watch this and kind of keep an eye on it.

And then today, first Friday of the month, we get the BLS, that’s the Bureau of Labor Statistics. This is the government’s report on what’s happening with employment, unemployment so they said that for the month of July 1.8 million jobs were created and unemployment was down, at a number now, at 10.2% but it’s not fully accurate and here’s why. First of all they have a 1% miscalculation into there and the miscalculation covers a bunch of different things. Also, there are 7.7 million people not counted right now that are either not part of the labor or participation force or not looking for a job. These might be people that don’t want to go back to work because they’re worried about COVID or they can’t go back to work because they’re in the music industry or they’re in the food industry and their job is just not open yet, so 7.7 million people right now not factored into this. So if we actually took those 7.7 million people, factored them back in and factored back in that 1% miscalculation, the true number for unemployment right now would probably be around 15.3% which is still unprecedented numbers.

I’m around all weekend, if you have any questions – let me know. If you have any buyers that need to get pre-approved, call me call me on my cellphones or text me, that’s always the best way to get a hold of me over the weekend.

Happy Friday, hope you have a great day, we’ll talk with you soon

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