Athen Apaquette

Soft economic news brought lower rates… We started the week’s economic data with personal income and spending. Income was up .3% and spending was up .4%. That was not good for mortgage rates, as it showed a pretty good increase in income and people’s spending. This is critical for the economy to move; we must spend, spend, spend. The manufacturing sector (ISM) said that they had a drop in manufacturing, mainly due to slowing world economy. China’s devaluing of the Yuan and their slowing economy showed up in the month’s numbers. Our imports (products coming unto the US) were up 2.2%, and our exports were down 3.3% – yes, in one month. This trade deficit means that the spread between what we buy from others (imports) and what we sell to other countries (exports) is getting wider and wider – not good for our economy. Of course, a slower economy means less likelihood of inflation and lower rates (just don’t open your mutual funds statement).

As you probably have read in previous musings, I have noticed that every end of September or beginning of October rates go down, so this is just the normal cycle.

The big number, if you have been reading these posts, first week of the month means JOBS JOBS JOBS…

The month of August saw only 142,000 jobs created, where expectations were for 201,000. More importantly, only 118,000 of the jobs were private sector. Yes, the government created 24,000 jobs in 1 month. But these are not “production related jobs”, so people look at the bare bones economy-supporting and supported jobs at 118,000. That is ½ of what is really needed to stoke the economy’s engine…

Also to be noted was the job participation number dropped even further to 62.4% – meaning only 62.4 or roughly 6 out of 10 eligible workers are working. People either retire early or give up looking for a job all together because of a lack of good jobs. So, our economy is still very soft. And this news brought us lower rates.

It does make the FOMC decision not to raise rates look like the wise one now, but many believe this is a vicious cycle, and they should have been raised.