Market News Update - Unemployment Down, Home Construction Up

I am sure if you stand outside the fence by the White House, you will see President Obama doing the happy dance in the Rose Garden.  The President is most likely celebrating Friday’s national unemployment report showing that unemployment unexpectedly declined to 7.8% from 8.1%.  Most experts were expecting the rate to increase by .1%.  This report comes two days after the President, according to 77% of the population that watched the debate, said he got his butt kicked by presidential challenger Mitt Romney.  The unemployment report is certainly welcome news for the President and his campaigning efforts.

The reality of the decline in the unemployment rate has more to do with people stopping their search for work than it does with new jobs created.  The numbers, however, do show a very slowly improving labor market with September’s report of an increase of 114,000 jobs.  Along with Friday’s employment report, the labor market announced that there was an upward revision to the employment numbers for July and August by 86,000.

There is a risk, however, of the unemployment rate jumping back over 8% in the next report if more job seekers resume their employment search.  The announcement of today’s decline undoubtedly will inspire some people that have given up to once again look for employment.  If many people jump back into the search for work without a significant increase in actual hiring’s, then the odds on the employment rate jumping in November’s report are quite high.  An announcement of an increase only five days before the election could have a dramatic impact on how voters cast their vote.

In other news, the pace of manufacturing is showing modest signs of improvement.  After 3 months of declining production, September showed a better than expected increase providing optimism for future growth.

Construction spending, although down as a whole, showed improvement in the residential sector.  Private residential spending rebounded a notable 0.9 percent, following a 0.1 percent slip in July.  Overall construction spending is up 6.5 percent.

In the release of the FOMC’s minutes from their last meeting, it is quite evident that although there was enough agreement amongst the members to launch QE3, it remains very clear that there are many areas the board is not of the same mind set.

The Fed has stated that they will keep interest rates low until 2015.  Some members have raised concern that this statement sends the wrong message about the economy.  Some members believe that saying rates will remain low for another 2 or more years indicates that the Fed is pessimistic about the economy and the recovery and this may delay hiring by employers and spending by consumers.

Next week’s economic reports are:

• Monday October 8^th – Markets Closed
• Wednesday October 10^th - MBA Applications
• Thursday October 11^th – First Time Jobless Claims

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 

Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

DRE Lic # 01520422
NMLS # 214851   

 

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