Jobs and housing drive the U.S. economy, and we continue to learn about each as the weeks and months pass by. We’ve also learned how behavior in the face of a pandemic can shutdown the U.S. economy. All of Orion’s brokers know that the housing market is doing very well, but what about other sectors?
Labor market conditions remain one of the main talking points when discussing the return to “normal” from the pandemic. Last Thursday’s jobless claims, from the prior week, totaled332,000, just missing expectations. The four-week moving average is now+335,750 which is the lowest level in 18 months and continuing claims came in at +2.665 million beating expectations. The total number of people receiving some form of unemployment benefit came in at 12.1 million (+180k) however 1year ago those numbers were at +30.3 million. Our brokers should know that economists are split on if the end of enhanced federal unemployment benefits will push people back into the workforce or not.
Orion’s management is very concerned with the labor picture. Obviously, borrowers need income to repay their mortgage, and the low rates Orion has been offering for many months can only help so much.
Despite the increase in COVID cases due to the delta variant throughout much of August, economic data remained strong as both businesses and consumers continue to adjust to a new normal. Inflation remains the main story of the recovery and 49percent of respondents in the NFIB’s small business optimism survey said they have raised prices and 44 percent expect to raise prices over the next quarter. Officially, consumer inflation slowed in August in what many hope is a sign that prices are beginning to moderate though the degree of moderation remains to be seen.
There are still many supply chain issues that need to be resolved. The pace of manufacturing growth will be held in check until staffing challenges and the lack of key production inputs wane. Back to school shopping helped to bump retail sales recently, but economists expect consumer spending to pull back a little this fall. There hasn’t been much news to significantly move mortgage rates, which have been relatively flat over the last month.
Lastly, the Federal Reserve’s Open Market Committee (FOMC) meets this week (September 21) and while no significant changes to monetary policy are expected, the market will be looking for guidance as to when the Fed will begin to taper its asset purchases. These assets, consisting primarily of Treasury and mortgage-backed securities, will, at some point, stop being bought by the Federal Reserve through its trading desk in New York. But Orion’s management believes that this will happen several months from now, and therefore won’t impact rates for quite some time. And a good interim step would be for the Fed to scale back and move to replacing the run-off (early payoffs) from its existing portfolio.