Fed Leaves Rates Unchanged…For Now
Late last week, as expected, the Fed left rates unchanged, but signals ‘further gradual increases’ ahead. Fed sees strong labor market and economic growth, but cautions that higher tariffs, and rising wages look to spur inflation. Risks to the economic outlook appear “roughly balanced”. Main debate here is whether the Fed hikes 2 or 3 times in 2019, with many economists believing 3 is the straw that breaks the camel’s back in terms of pushing the economy in to recession. Many don’t see the need for the Fed to do anything at all and are highly skeptical on the inflation creeping up part. In my opinion, the greatest threat to the economy right now is the severe shortage of skilled labor available. Stocks, rates, mortgages didn’t react much to the Fed news.
Jobless Claims At 45 Year Low
New applications for U.S. unemployment fell slightly last week and the number of Americans receiving benefits remained at a 45-year low as strong labor market conditions continued. Initial claims for state unemployment benefits dropped by 1,000 to a seasonally adjusted 214,000 for the week ended Nov. 3, the Labor Department said on Thursday. Data for the prior week was revised to show 215,000 claims received, which was 1,000 more than previously reported. The weekly claims were in line with predictions of economists polled by Reuters, who had forecast 214,000 people would file for benefits. The Labor Department said claims for North Carolina continued to be affected by Hurricane Florence, while Hurricane Michael impacted those for Florida and Georgia. Claims data for Massachusetts was estimated. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell to 213,750 in the latest week, a decline of 250 from the prior week's upwardly revised reading of 214,000.
Small Business Optimism Slides Lower
The National Federation of Independent Business small business optimism index declined 0.5 point to a seasonally adjusted 107.4 in October, a four month low. The biggest declines of the 10 components that make up the index came from questions on expansion and earnings trends, while the only gain came from plans to increase inventories. The NFIB said "the October report sets the stage for solid growth in the economy and in employment in the fourth quarter, while inflation and interest rates remain historically tame."
Total Credits Drifts Lower
One month after both revolving and non-revolving consumer credit hit fresh all-time highs, the Fed reported that in September total consumer credit rose to $3.950 trillion, rising $10.9 billion in the month, or a 3.3% SAAR, and missing expectations of a $15 billion increase. What was surprising is that or revolving debt, i.e., credit card usage, unexpectedly shrank by $312 million after jumping $4.6 billion in August. This was the 5th monthly decline in credit card usage in 8 months; it also means that in the 9 months of 2018, there has been a decline in revolving credit in more than half. Incidentally, until 2018, credit card debt had posted a streak of 4 consecutive years in which there had not been a single decline starting in 2014.
Car Loans Trending Same Direction As Student Loans
Courtesy of Sotheby's International Realty's in-house Lender Simon Atik, 310.880.8414, Simon.Atik@grarate.com, Vice President of Mortgage Lending, Guaranteed Rate Affinity.
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