Mortgage Market Update - There was a mix of tricks and treats among last week’s labor sector, home price and Fed rate headlines - 11/6/2023

Hey everyone, it's Larry Bailey from Mortgage Workflow Partners. This is for the Week of October 30, 2023, in Review:

• Lower Job Numbers Closer to Real Picture
• Private Payrolls Below Expectations
• “JOLT” Higher for Job Openings
• Continuing Jobless Claims Reach 6-Month High
• Is the Fed Done with Rate Hikes?
• Home Prices Hitting Highs

00:00 Introduction
02:01 Jobs Report Analysis
04:03 Private Payrolls
05:37 Job Openings
06:47 Continuing Jobless Claims
07:36 Fed's Decision on Rate Hikes
09:00 Home Prices
11:11 Cooking Segment
12:02 Upcoming Data

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Transcript

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Hi everyone, Larry Bailey here, Mortgage Workflow Partners. It is November 6th, 2023 already and this is your weekly newsletter review. We're going to review the week of October 30th, 2023. Information is brought to you from MBS Highway, your trusted source for mortgage market intelligence. Brought to you also by Mortgage Workflow Partners. Listen gang, shiny things are awesome. Technology is awesome, but I'm telling you right now, every company. We work with starts with understanding workflow. We spot so many ways to really get into what needs to be updated and reflected upon in current workflow. And then we automate the heck out of it or leverage all of the tools you're already paying for. Give us a shout over at 888-522-7181 or visit us over at mortisworkflowpartners.com. I guarantee spending a 15 minute meeting with me asking you basic questions. We can some numbers closer to the real picture. The next story is Private payrolls below expectations. Third story is the jolt higher for job openings. Fourth story is continuing jobless claims reached six months high. The next story, fifth story is, is the fed done with rate hikes? And the last story is home prices hitting highs. Of course, we'll have a hack in there. I'm guessing it's going to be food, but let's find out together. Let's get to that. First story, the lower job numbers closer to the real picture. If you're listening to this on podcast, thank you very much. You can get over to the mortgage doc community under the market information and try to figure out the full video along with everything we share on screen here in case you're interested in following along on the screen. So the Bureau of Labor, the Bureau of Labor Statistics, also known as the BLS, reported that there were 150,000 jobs in the BLS. This is the largest number of jobs created in October versus the 180,000 that were forecasted, which is the lowest amount since June of 23. This resulted in the unemployment rate rising from 3.8 to 3.9%. So the bottom line here is remember that there are two reports within the jobs report and there's a fundamental difference between them. As a recall, the business serves as where the headline job number comes from and it's based predominantly on modeling and estimations. In fact, one of the biggest reasons we saw job gains last month was the birth slash death model, who knew, where the BLS estimates new businesses, new business creation, relative to closed businesses and how many jobs this created like, really? Again, I told you this jobs report thing is I've said this in the past. You really have to understand what's going on. So listen, in this case in October, this modeling added 412,000 jobs, but it's hard to believe that many businesses were started last month in the current economic climate, right? Especially given the cost of capital. To create those businesses. So the household survey, which is where the unemployment rate comes from, is considered more of a real time because it actually is derived by calling households to see if those households are employed. Go figure. This survey also has its own job creation component and it told a completely different story showing 348,000 job losses. So the average weekly hours worked also declined slightly which is important because it's one of the ways businesses cut costs is to cut the number of hours worked. In fact, workers have lost half. An hour on average since the beginning of the year. Well, this doesn't sound like much. Remember, this is across 168 million people in the labor force and it equates to 2 million job losses just on its own because of that half. So, next story is private payrolls below expectations. You'll see the image on here from ADP employment report. So, ADP's employment report showed that private payrolls were weaker than forecasted in October with just 113,000 jobs created while pay growth reached its slowest pace in two years. Almost all of the job growth came from service-provided industries with goods producing companies only adding 6,000 jobs. So the bottom line here is Nella Richardson, Chief Economist for ADP noted that, quote, quote, while the labor market has slowed, it's still enough to support strong consumer spending, close quote. She also explained that quote, big post pandemic pain increases seem to be behind this close quote. On that note, annual pay for job stayers increased 5.7% and the job changer saw an average increase of 8.4%. These figures have cooled considerably from last year's highs of 8% for job stayers and 16% for job changers, which is significant because it suggests lower wage pressured inflation. I will also say going back to Nila Richardson's comment, this is my own personal interjection, but spending, I don't know, we've been seeing a lot of reports about how people are spending, but they're. Putting it on the credit cards. So I don't know. We'll have to see what this really means in upcoming reports, obviously. So that showed that job openings rose from $9.5 million in August to$9.55 million in September, beating expectations. However, the hiring rates stayed the same at 3.7%. Which is the lowest since the shutdowns during the pandemic. The quit rate? That's at 2.3% and that was left unchanged from the last report and this low rate suggests there is a lack of employers trying to entice work. What's the bottom line here? Despite the monthly increase, job openings are down by 1.3 million when compared to the same time last year, plus the reported total for September is likely over stated. The increase in working from home means job listings are being posted in multiple states more frequently. As a result, we've seen this, they're being over-counted in the jolts total meaning the report may not be as strong as the latest week with 217,000 people. The real story here is continuing claims, which increased by 35,000, showing that 1.8- 2,000,000 people are still receiving benefits after following their initial claim. The last time continuing claims were this high was back in April of 23. So the bottom line here is while initial jobless claims remain relatively low. They have increased for the last two weeks with the latest data reaching highs not seen since early September continuing claims have also risen for seven straight weeks. Overall, the data shows that employers are trying to hold on to work. It's becoming harder for people to find employment once they are let go and for those people that I know and know of in the financial industry that could not be more true. Once they're let go, it's extraordinarily hard. On mass to find employment. Here's the next story. Is the Fed done with rate hikes? So after 11 rate hikes since March of last year, the Fed left their benchmark Fed funds rate unchanged again. I again at a rate of five and a quarter to five and a half at their meeting last Wednesday. Just like they did in September. So the Fed funds rate, remember, is the interest rate for overnight borrowing between banks and it's not the same as mortgage We'll be right back. And while the Fed hikes the Fed funds rate, they are also trying to slow the economy of curb inflation when they do that. So the bottom line here is the Fed's decision to pause rate hikes for the second straight meeting was unanimous. However, Fed Chair Jerome Powell did leave the room open, excuse me, did leave the door open for room for another rate hike at their next meeting, which is December 13th. The strength of the labor sector remains a key factor. They are considering their decision with the Fed looking for clear signs that the labor market is softening as they consider further rate hikes. While the latest job report for October was, weaker than forecasted it remains to be seen if that's enough for the Fed to pause additional hikes. The Fed will see November's job data from ADP and the BLS releasing December 6 and December 8 respectively along with upcoming inflation reports. All of this will certainly play a role in their decisions. Here's a next story, so home prices are hitting highs, here's a case show a home price index image on screen, you can see the graph showing continued increase in trend, so the case shiller home price index which is considered the quote gold standard close quote for appreciation, showed home prices nationwide rose 0.9% from July to August after a seasonal adjustment marking the seven. The federal housing finance agency, also known as FHFA, that house price index also saw home prices rise 0.6% in August with their index reporting gains every month so far this year. Hey, note the FHFA's report, remember that it measures home price appreciation on single family homes with conforming loan amounts. And I know the text says represents lower price homes, that sentence has got to go. So, MBS highway. If you're listening, maybe we change that language to say something like it represents average price homes. There's nothing low priced about a million dollar home. The conforming loan limits have increased exceptionally high. If you want to see what the 2024 limits are, just go to Google. Just Google conforming loan limits for 2024. And you'll see it's not lower price homes, especially in high cost areas. So the bottom line here is home values have hit new all time highs. According to Kay Schiller, the FHFA, CoreLogic, Black Knight and Zillow more than recovering from the downturn we saw in the second half. This year, prices are on pace to appreciate between 6 and 8%, depending on the index, based on the reported pace of appreciation through August. These indexes show that now remains a great opportunity for building well through home ownership and appreciation gains. Couldn't say it better myself and you gotta get in it. The problem right now is inventory. We've known that. We haven't seen a story about inventory recently but I'm sure we will in the coming days. So here's a family hack of the week. I knew it was food. Told you it was going to be food. So fall is the perfect season for roasting root vegetables. This recipe is courtesy from the New York Times and it won't disappoint. So preheat. That oven to 425 degrees Fahrenheit. Peel three pounds of assorted root vegetables. Some ideas here are carrots, parsnips, turnips, potatoes. Cut them into one to two inch chunks. Place them in a baking pan and toss in one quarter cup olive oil and sprinkle a good amount of salt and pepper to season those suckers up. Roast for 20 minutes then turn drizzling more oil. If they look dry don't let them dry out because that stinks. Roast for another 20 minutes and then stir. Cover in a chopped, stirring some chopped rosemary, thyme, and parsley or any herb of your choice. Bake for an additional 20 to 30 minutes so that's a total of about an hour until they're crisp. Garnish with rosemary. Rosemary and thyme, and enjoy. Here's what to look for this week, the week of November 6th. So the economic data calendar is quiet, but we will see more housing appreciation data when corel projects, home price index for September is released Tuesday. The latest jobs claims data will also be reported on Thursday. The investors will also be closely watching Wednesday's 10 year note in 30 year Thursday's 30 year bond auction for level of demand. If you have been keeping an eye on this number, we think was down to 94 not too long ago. The fact that it's now par point 63 is great, but we have lost 30 basis points since Friday's close or since Monday's open, depending on how you look at that. I think that traders will probably say since Monday's open, I think it's the appropriate way. Anyway, get with your team. I just saw mortgage interest rates back down in the sixes versus the eights we saw not too long ago. So check out anything. If you're looking for money, go looking now. Like now's, there's never a better time to get money than now, whenever now is. So my name's Larry Bailey. Thanks for paying attention to these these weekly. Reviews that we do and if there's anything else that we can help you with, let us know over at mortgage workflow partners dot com. Everybody take care. See you now. Bye bye.