Economic Update: Week Ending 5/5/18

Economic update for the week ending May 5, 2018:

 

April unemployment rate lowest since 2000 - The Department of Labor Statistics reported that U.S. employers added 164,000 new jobs in April. That was a little below the 190,000 that analysts expected. The unemployment rate dropped to 3.9%, an 18 year low. The unemployment rate has steady declined from its peak of 10% in 2009. Average hourly wages grew just 2.6% from April 2017. This was the most anticipated part of the report. Wage growth has been stagnant, which is unexpected. Usually when the unemployment rate drops there is more competition for workers and wages rise. That has not happened at the rate expected over the last 9 years. In January wages finally began showing signs of rising when year over year wage growth came in at 2.9% which surpassed analysts. Interest rates began to rise because experts felt that higher wages would give people more spending power and lead to higher inflation. Higher inflation causes interest rates to rise. Stocks slipped because higher wages raise corporate labor costs, and higher interest rates raise their borrowing costs, which lowers profits. It is beginning to appear that January’s wage gain of 2.9% may have been an atypical result, as February and March numbers showed that wages grew 2.7% and April is now back to a 2.6% year over year wage gain. 

Stocks end week mixed in another turbulent week of trading - Despite a rally on Friday where the DOW gained 332 points, stocks finished the week mixed. Companies reported strong third quarter earnings, but gave more cautious guidance on future profit increases. Companies expressed more caution because of increased costs of steel and aluminum due to tariffs, increased energy costs (oil prices have increased dramatically), higher interest rates and borrowing costs, and higher wages and labor costs. Friday’s jobs report revealed that wage increases are back to the levels we saw in 2016 and 2017, and not the wage increase levels we had seen at the beginning of 2018, which investors feel will lower pressure on interest rates increases. Stocks rose sharply on Friday after the jobs report was released. The Dow Jones Industrial Average closed the week at 24,262.51, down from last week’s close of 24,311.19. It is down 1.8% year to date. The S&P 500 closed the week at 2,663.42, almost unchanged from 2,669.91 last week.  It's down 0.4% year to date. The NASDAQ closed at 7,209.62, up  from 7,119.80 last week. It is up 4:4% year to date.

Treasury Bond yields higher this week - The 10 year treasury bond closed the week yielding 2.95% almost unchanged from 2.96% last week.The 30-year treasury bond yield ended the week at 3.12%, slightly downfrom 3.14% last week. 

Mortgage Rates slightly lower this week - The May 3, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.55%, down slightly from last week’s 4.58%. The 15 year fixed was 4.03%, almost unchanged from 4.02% last week. The 5-year ARM was 3.69%, down from 3.74% last week. Rates were slightly lower in Friday so next week’s rates could be slightly lower. 

California’s GDP figures makes it the worlds fifth largest economy - Data released by the Commerce Department showed that California’s GDP exceeded $2.7 trillion in 2017. Only the United States, China, Japan, and Germany surpassed the economic output of California. 

Economic Update: Week Ending 4/28/18

Economic update for the week ending April 28, 2018:

 

Stocks lower in turbulent week - It was another wild week for stocks. The Dow dropped 425 points on Tuesday after Amazon reported record profits, but gave guidance that they expected future profits to decrease due to tariffs. The 10 year treasury bond yield rose above 3% for the first time in 4 years, which also hurt the market. On Thursday The Dow gained 238 points as more companies beat profit expectations, and bond yields dropped slightly. A lower than expected first quarter GDP reading on Friday left investors with mixed feelings. Some felt that the economy may be slowing, while others hoped that the slower growth number will keep the Federal Reserve from increasing interest rates at a faster pace. Higher rates were also a drag on the markets this week. The Dow Jones Industrial Average closed the week at 24,311.19, down from last week’s close of 24,462.91.  It is down 1.7% year to date. The S&P 500 closed the week at 2,669.91, almost unchanged from 2,670.14 last week.  It's down 0.1% year to date. The NASDAQ closed at 7,119.80, down from 7,146.13 last week. It is up 3.1% year to date.

Treasury Bond yields higher this week - The 10 year treasury bond closed the week yielding 3.00% up from 2.96% last week.The 30-year treasury bond yield ended the week at 3.18%, up from 3.14% last week. 

Mortgage Rates higher this week - The April 26, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.58%, up from last week’s 4.47%. The 15 year fixed was 4.02%, up from 3.94% last week. The 5-year ARM was 3.74%, up from 3.67% last week. Rates were lower at the end of the week, so next week’s rates should be slightly lower. 

First reading of the first quarter Gross Domestic Product weaker - The Commerce Department reported that their first reading of the first quarter GDP grew at just a 2.3% annualized rate. The economy was dragged down by sluggish consumer spending which grew by just 1.1% for the first quarter of 2018. That was the slowest pace since the second quarter of 2013. Economists expect growth to pick up in the second quarter. 

U.S. home sales and prices higher in March - The National Association of Realtors reported that existing home sales increased 1.1% in March from February levels, but were down 1.2% year over year from last March’s sales numbers. Existing home sales include all 1-4 unit single family homes, condominiums, town-homes, and coops. The median price rose on a year over year basis for the 73rd straight month, increasing 5.8% from one year ago. The unsold inventory level was at a 3.6 month supply of homes for sale, down from a 3.8 month supply one year ago. Inventory levels have fallen year over year for 34 straight months. 

Economic Update: Week Ending 4/21/18

Economic update for the week ending April 21, 2018:

Stock markets up for second straight week - Stocks ended the week higher again as first quarter corporate profits began to be reported. Profits were stronger than expected and stocks rose. Profit season was a welcome relief to investors as it seems to distract from almost two months of uncertainty caused by trade and tariff fears, and political turmoil. While fears of a trade way still remain, as well as the prospects of higher interest rates, investors remain bullish. They feel that the tax cuts, and increased spending will keep the economy strong through 2018 and 2019. The Dow Jones Industrial Average closed the week at 24,462.91, up from last week’s close of 24,306.14. It is down 1% year to date. The S&P 500 closed the week at 2,670.14, up from 2,656.39 last week.  It's down 0.1% year to date. The NASDAQ closed at 7,146.13, up from 7,106.55 last week. It is up 3.5% year to date.

Treasury Bond yields sharply higher this week - The 10 year treasury bond closed the week yielding 2.96% up from 2.82% last week.The 30-year treasury bond yield ended the week at 3.14% up from 3.03% last week. 

Mortgage Rates higher this week - The April 19, 2018 Freddie Mac Primary Mortgage Survey reported that the 30 year fixed mortgage rate average was 4.47%, slightly above  last week’s 4.44%. The 15 year fixed was 3.94%, up from 3.87% last week. The 5-year ARM was 3.67%, up from 3.61%  last week. Rates were higher at the end of the week, so next week’s rates will be higher. 

California home sales up slightly - Home prices show year over year double digit increases in Los Angeles - The California Association of Realtors reported that Existing, single-family home sales totaled 423,990 in March on a seasonally adjusted annualized rate. That represented a 1.6% increase from last March’s sales pace.

The median price of a home in March in California was $565,830, up 8.9% from March 2017. The median price in Los Angeles County rose 13.6% year over year from last March. It was the fourth straight month of double digit year over year increases. Ventura County showed the smallest year over year increase in the state with the median price growing just 1.8%Inventory levels statewide remained at historic lows. 

The unsold inventory index dropped to a 2.9 month supply in March, down from a 3 month supply in March 2017. This historic low inventory is pushing prices higher.