Economic Growth: You Are A Dream Killer, Sir…

  • December 4, 2013

growth2Let’s remind ourselves that good economic news is usually bad news for the bond market. When good news comes out, mortgage bond prices generally go down, and mortgage rates usually increase. Before we even had our first cup of coffee, our dreams of a positive day were crushed by strong employment data.

  • The ADP Employment Report beat economists’ forecast in a very big way today. Employers added 215k jobs versus the expected 173k in November. That is the strongest reported number since last year. “No, it’s not my alarm clock going off? It can’t be…”
  • To add insult to injury September’s number was revised adding 40k more jobs. “Ok, now I’m up…”
  • The Fed Beige Book was released this afternoon. This report showed manufacturing expanded, residential real estate activity improved, and economic growth continued at a moderate pace.  Adjectives like “Moderate” and “Beige” never felt so dramatic.
  • Prices did rebound this afternoon but not enough to put us back in the green for the day. “There’s always tomorrow…”

The economy is showing resilience despite the government shutdown; this adds to speculation that the Fed will stop supporting low interest rates as soon as this month. Tomorrow morning GDP, jobless claims, and factory orders will be released. If any of these reports deviate from forecast it could move the market again…maybe this time in our favor. Keep the dream alive.

By Lindsey Fediuk, Quicken Loans Capital Markets Analyst

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