Discussing the Fed leaving their benchmark rate unchanged, jobs and unemployment, several great reports on the economy and the best investment for the 5th year!
The Best Investment for 5 Years Running
According to a Gallup poll, Americans think real estate is the best long-term investment for the 5th year! Check out the chart showing the results from the pol:
I am not a financial advisor so I would suggest that you speak to your tax person, accountant and financial advisor to determine what is your best course of action. Owning your home is a great wealth builder and increases your quality of life BUT you need to diversify in my opinion.
Fed Leaves Interest Rates Unchanged
From the Federal Reserve:
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-3/4 to 2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.
Remember that the Fed does not directly set mortgage rates BUT their actions do have an effect. They could raise their benchmark rate in September IF the economy continues to grow/improve.
Be sure to check back tomorrow as I plan on covering the latest reports on mortgage rates.
Jobs and Unemployment
In the week ending July 28, the advance figure for seasonally adjusted initial claims was 218,000, an increase of 1,000 from the previous week’s unrevised level of 217,000. The 4-week moving average was 214,500, a decrease of 3,500 from the previous week’s unrevised average of 218,000.
Great news but wait there’s more!
The BLS just reported that total nonfarm payroll employment rose by 157,000 in July, and the unemployment rate edged down to 3.9 percent.
The number of jobs added was below what economists expected BUT the unemployment rate is close to an 18 year low! Great news but sadly, wage growth is still weak.
The key measure that I look at is the U-6. It measures the unemployed, people employed part time but want a full time job and people that are unemployed that want a job but are not currently looking for a job.
And the U-6 improved YoY from 8.9% in July 2017 to 7.5% in July 2018.This is the lowest level for the U-6 since 2001!
Despite the weak wage growth, we can call these reports a win. Especially since a bunch of the job growth is from manufacturing and construction.
Manufacturing jobs are good paying jobs and could help more people to improve their financial situation. We can hope that the increase in construction employment will help with the limited number of homes for sale in many areas of the country.
One disturbing thing that I read is that the number of people holding multiple jobs increased to the highest level since 1999. It is pretty hard to have a good quality of life if all you do is work…
Fannie Mae’s Serious Delinquency Rate Decreased
From Fannie Mae:
The Conventional Single-Family Serious Delinquency Rate decreased 6 basis points to 0.97% in June. The Multifamily Serious Delinquency Rate decreased 3 basis points to 0.10%.
Great news since fewer delinquencies should mean fewer foreclosures.
Manufacturing and Service Sector Expands
Economic activity in the manufacturing sector expanded in July, and the overall economy grew for the 111th consecutive month
Also from ISM:
Economic activity in the non-manufacturing sector grew in July for the 102nd consecutive month
Excellent news for the economy!
Wells Fargo Settles MBS Shenanigans for $2.09 Billion
Wells Fargo has agreed to pay $2.09 billion in penalty to settle claims related to mortgage loans originated in the run-up to the financial crisis.
“Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted,” said Alex Tse, acting U.S. attorney in San Francisco.
The loans in question included subprime and other relatively risky home loans.
Over $2 billion may seem like a lot of money, think about the damage that Wells Fargo did to the economy. Think about the lives that were screwed up by the actions of Wells Fargo.
Now does it sound like Wells Fargo paid enough for the damage they caused?
A New Misery Index?
From Charles Hugh Smith:
Isn’t it obvious that those at the top of the wealth-power pyramid don’t want us to know how much ground we’ve lost while they’ve gorged on immense gains?
In the late 1970s and early 1980s, an era of stagflation, the Misery Index was the unemployment rate plus inflation, both of which were running hot.
By these measures, the U.S. economy’s Misery Index has never been lower and hence prosperity has never been higher or more widespread.
But this simply isn’t true: the top 5% are indeed doing better than ever but the bottom 80% are losing ground and the middle 15% are only appearing to do well because asset bubbles have temporarily created illusory wealth.
I propose a 21st century Misery Index: Labor’s Share of the Economy and Real-World Inflation.
If you think about how you are making more but it doesn’t always feel like it, then read this article.