Our hearts go out to the victims and families impacted by the shooting in Sutherland Springs, Texas.
In terms of economic data last week, the biggest news was lower-than-expected jobs numbers. In addition, President Trump nominated Jerome Powell to be the next chairman of the Federal Reserve. There was a whole lot going on, so let’s jump right in.
Personal Income and Outlays
Personal incomes were up 0.4% in September. Wages and salaries were up by the same percentage. Consumer spending was also up 1.0%. There was a 2.1% increase in durable goods spending as people had to replace vehicles after Hurricanes Harvey and Irma.
Inflation didn’t keep up with rising wages or spending. It was up 0.4% overall, but rose only 0.1% when food and gas were taken. Prices are up 1.6% overall and 1.3% in core categories on the year. This is well below the Fed’s 2% inflation target. Analysts say energy prices are pretty low, and unless wages continue to rise at a steady pace, inflation won’t rise.
On the other hand, people may be spending as if they expect prices to go up. Americans only saving 3.1% of their income, which is a 10-year low. However, this is being blamed on the hurricanes.
S&P Corelogic Case-Shiller HPI
Prices were up 0.5% across 20-city index on a seasonally adjusted basis in the month of August. They were up 0.4% overall and 5.9% on the year. San Diego was up 1.0%, with Charlotte and Las Vegas up 0.9%. Cleveland home prices were just behind this pace of appreciation, up 0.8% on the month.
On a yearly basis, Seattle leads the way, up 13.3%. After that most cities are in the mid-to-high single digits. Washington, D.C., trails everyone, up only 3.4% annually.
It was a good month for consumer confidence in October. It rose more than six points to 125.9. Only 17.5% of those surveyed think that jobs are hard to get, down 0.5% from September. In addition, only 11.8% of people are pessimistic about the future of the jobs market.
Consumers are also expecting higher income in the future, with those who are pessimistic only sitting at 7.4%. In addition, 42.1% of people are bullish on the stock market, with only 23.2% seeing a dimmer outlook in the future.
In terms of buying plans, hurricane vehicle replacement also showed up here. Plans to buy a car were up 1% to 13.1%. The only real concern in this report is that inflation expectations were down 0.2% to 4.7%.
MBA Mortgage Applications
Overall mortgage applications were down 2.6% as rates were up four basis points on the week for a 30-year-fixed mortgage to 4.22%. Purchase applications were down 1.0% and down 5.0% on the refinance side.
ISM Manufacturing Index
The manufacturing Index was down 2.1 point to a level and 58.7, meaning it’s still growing, but at a slightly slower pace. New orders are still high at 63.4. Orders of exports are also still high.
Employment is down 0.5 point but still remains at 59.8, just off a 6.5-year high. Delivery times are still longer, but hurricane effects appeared to be lessening. Backlog orders are getting higher in what could be a good sign for future hiring.
Initial jobless claims were down 5,000 to 229,000. The four-week average moved down 7,250 to 232,500.
On the continuing claims side, they fell 15,000 to 1.884 million. The four-week average was down 9,250 to about 1.896 million.
There were 261,000 jobs added to nonfarm payrolls in October. This is a bounce back from September, when 33,000 jobs were lost due to the hurricanes. However, it’s not quite the bounce analysts had been expecting. The consensus estimate was for 325,000 at the jobs.
Private payrolls saw 252,000 jobs added while government payrolls added 9,000 jobs. There were 24,000 jobs added in manufacturing.
The unemployment rate dropped to 4.1%, down 0.1%. However, this was likely due to the fact that fewer people were looking for jobs, as the labor force participation rate fell to 62.7% from 63.1% in September. Hourly earnings remained flat on the month while rising 2.4% on the year. The average workweek remained at 34 hours, 24 minutes. Professional business services added 50,000 jobs with an 18,000 job rise in temporary help.
The U.S. trade deficit increased $700 million to $43.5 billion. Exports were up 1.1% to $196.8 billion. However, there was a 1.2% rise in imports to $240.3 billion.
On the export side, industrial supply exports rose $1.9 billion to $38.4 billion. Most other key areas fell including capital goods. Services exports were up 0.4% to $66.2 billion.
Capital goods imports rose to $41.1 billion, up $1.1 billion, which is a good sign for U.S. business investment. Imports of consumer goods were up a bit to $49.2 billion, and oil imports fell to $9.2 billion. Imports of services were also up 1.0% to $44.3 billion.
Mortgage rates were unchanged or up slightly last week. The market priced in Jerome Powell’s nomination to the Federal Reserve chair position. He’s expected to continue many of the policies set by outgoing Chairwoman Janet Yellen.
If you’re in the market, it’s a great time to lock your rate.
Rates on 30-year fixed mortgages averaged 3.94%, unchanged from last week, with 0.5 points in fees. This is up from 3.54% at this time last year.
The average 15-year fixed mortgage rate was up two basis points to 3.27% for 0.5 points. At this time a year ago, the rate was 2.84%.
On the adjustable rate side, a 5-year adjustable rate mortgage averaged 3.23% for 0.5 points, up two basis points on the week. At the same time last year, the average rate was 2.87%.
It’s iPhone season! You can tell because Apple stock is really performing well. The stock for chipmaker Qualcomm was up as Broadcom considered buying them. This flurry of activity helped propel all three major indexes to record highs Friday.
The Dow Jones industrial average was up 22.93 points to close at 23,539.19 Friday, up 0.45% on the week. Meanwhile, the S&P 500 rose 7.99 points and 0.26% on the week after closing at 2,587.84. Finally, the Nasdaq finished at 6,764.44, up 0.94% on the week and 49.49 points on the day.
The Week Ahead
Wednesday, November 8
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
Thursday, November 9
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The four-week moving average of new claims smooths out weekly volatility.
Friday, November 10
Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.
After everything hitting last week, this week is really light. Look for the stock market to drive things.
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