Over the last few weeks, many economists have been raising their forecasts for economic growth in 2010. The economic data released this week generally did not support this outlook, however, producing some daily volatility. As a result of the weaker than expected data, mortgage rates ended the week a little lower.
In December, the economy lost -85K jobs, which was lower than the consensus forecast of -5K, and the Unemployment Rate remained at 10.0%. A small revision to the November data created a gain of 4K jobs, the first monthly increase since December 2007. The report indicated that 661K people dropped out of the labor force in December. The details suggest that small businesses may be creating jobs more slowly than larger companies. The manufacturing and constructions sectors continued to perform poorly. Average hourly earnings, an indicator of wage growth, showed a small increase. Overall, the data was weaker than expected, and mortgage rates moved lower after the news. In the housing sector, November Pending Home Sales fell 16% from October, but the decline followed nine straight months of increases and November Pending Home Sales were 15% higher than one year ago. Pending home sales are a leading indicator of future housing market activity. Recent data has been heavily influenced by the timing of the homebuyer tax credit, which was originally set to expire at the end of November. A surge of buyers attempting to purchase before the original deadline pulled demand forward. When the homebuyer tax credit was expanded and extended through the first half of 2010, the time pressure was removed. According to the National Association of Realtors (NAR), we should see another "notable" gain in sales activity in coming months. For more free mortgage advice please email keith@frontstreetmtg.com.
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