Anniemac
Inside Track

Market Update from Our CEO- 05.06.16

 

Daily Quote: Coming out of your comfort zone is tough in the beginning, chaotic in the middle, and awesome in the end...because in the end, it shows you a whole new world !!  Make an attempt..

Fun Fact Of The Day:  More babies were born in the United States in 2007 than any other year in the nation's history — and a wedding band made increasingly little difference in the matter. The 4,317,119 births, reported by federal researchers Wednesday, topped a record first set in 1957 at the height of the baby boom.  

 

A Riddle, Wrapped In A Mystery, Inside An Enigma

And no…I am not talking about how we wound up with a “Hillary vs. The Donald” Presidential election.  5 seconds of thought on what’s been going on in Washington for the last decade should answer that question for you. 

The real riddle, slash mystery, slash enigma which should be of interest to anyone who makes a living on interest-rate sensitive products is how do you reconcile very slow economic growth with a fairly healthy labor market.  Wait!  Before you fall asleep reading that question or pass over this section on your way to the joke at the bottom of this commentary, ask this question once again.  Seriously. How can you have a very poor showing of GDP during the 1st quarter (0.5%) yet we had job gains in excess of 209,000 during that same period?  Sounds kind of counter-intuitive.  It’s reasonable for you to think that more people working means more people spending…and more people spending should translate into more economic growth. 

The answer, according to the Federal Reserve Bank of Kansas City, is productivity.  Productivity measures hourly output per worker…or in layman’s terms, how many widgets was a worker creating last month relative to this month.  If the worker created 100 widgets last month and this month created only 99, then productivity fell by 1% over the month.  You don’t need a PhD in Economics to know that if you own a business and your workers are becoming less productive that your ability to grow will be hampered.

 

So why is Productivity declining?  Several reasons probably. 

  1. Due to increased employee and compliance costs business owners are not terribly interested in hiring anyone new until they absolutely have to.  So today’s employee is being asked to do more and at some point there are diminishing returns from this tactic.
  2. Those that see business as the enemy of man and applaud the ever increasing stranglehold of regulations seemingly miss the fact that regulations require more work and money, that the costs of these regulations are simply put back on the already overburdened consumer anyway, that these additional cost of overregulation means there is less money to use for expansion and entrepreneurial endeavors, and the uncertainty of future regulations exacerbate my first point above.  So while the world needs rules at some point too many rules stymy the very thing the world needs most…high paying jobs and productive people.
  3. Finally, the US economy continues to involuntarily shed jobs in areas such as energy production and manufacturing and those jobs seem to be heading into the services space.  So a shift in the mix that makes up the US economy takes time to develop deep roots and during that transitional phase people simply aren’t as productive as they were at their previous positions.

 

What Does This Mean For Mortgage Participants?   

  • First off it means a continuation of a low interest rate environment throughout the rest of this year.  You’re welcome. 
  • Secondly it also means that if you personally want to be more productive in your role as Loan Officer, Branch Manager or Real Estate Agent you should stop stressing over “the next Fed rate hike” and get back to work.  A hike or two isn’t in the cards and are meaningless anyway. 
  • Next you should also stop trying to figure out where rates are going to be tomorrow or next week and lock when you have a qualified borrower and a complete submission. 
  •  And last, but far from least, disconnect from all social media not directly related to business because I personally think that following people like the Kardashian’s and Snapchatting your every movement are the real productivity killers effecting America.  Now you can scroll down to the joke!

 

Economic News/Activity:

 

Time

Release

Period

B'Berg Survey

Actual

Prior

Revised

08:30

Change in Nonfarm Payrolls

Apr

200k

160k

215k

208k

08:30

Two-Month Payroll Net Revision

Apr

--

-19k

--

--

08:30

Change in Private Payrolls

Apr

195k

171k

195k

184k

08:30

Change in Manufact. Payrolls

Apr

-5k

4k

-29k

--

08:30

Unemployment Rate

Apr

4.90%

5.00%

5.00%

--

08:30

Average Hourly Earnings MoM

Apr

0.30%

0.30%

0.30%

0.20%

08:30

Average Hourly Earnings YoY

Apr

2.40%

2.50%

2.30%

--

08:30

Average Weekly Hours All Employees

Apr

34.5

34.5

34.4

--

08:30

Change in Household Employment

Apr

170

-316

246

--

08:30

Labor Force Participation Rate

Apr

63.00%

62.80%

63.00%

--

08:30

Underemployment Rate

Apr

--

9.70%

9.80%

--

15:00

Consumer Credit

Mar

$16.000b

--

$17.217b

--

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