CCL Market Update: JOLTS, Mortgage Applications, Consumer Price Index, Jobless Claims, Consumer Sentiment, Mortgage Rates

JOLTS

In the latest indications of strong, tight conditions in the labor market job openings rose to a higher than what was expected level of 6.170 million in July for a 0.9 percent increase from June. Hirings also rose, up 1.3 percent to 5.501 million, which is 669,000 below openings. Openings have been far ahead of hirings for the past several years to indicate that employers are having a hard time filling positions. Other indications are steady to higher with the separation rate at 3.6 percent, the quits rate at 2.2 percent, and the layoff rate at 1.2 percent. The only employment data that was not strong, though not part of the JOLTS report, was the wages factor.

Mortgage Applications

Due to perhaps the declining interest rates, purchase applications for home mortgages rose a seasonally adjusted 11 percent in the week of September 8th, while applications for refinancing, which were not seasonally adjusted, rose 9.0 percent. Unadjusted, the purchase index decreased 13 percent from the prior week and was 7 percent above the level a year ago. The refinance share of mortgage activity increased by 0.1 percentage point to 51.0, the highest level since January. This is the second consecutive weekly increase in purchase applicat6ions after 3 consecutive weeks of declines is a sharp one and widens the year on year gain by two percentage points to bring it back up close to the 8 percent plus gains seen earlier in the year.

Consumer Price Index

For the first time since February, core consumer prices did not come in below expectations hitting economists’ consensus of 0.2 percent gain. Overall prices rose 1 tenth more than expectations at an energy-inflated 0.4 percent. The core readings, housing, which is the report’s dominant component has been moderating but picked back up in August to a 0.4 percent gain. Within housing, lodging away from home reversed July’s unusual plunge with a 4.4 percentage surge while owners’ equivalent rent rose 0.3 percent. Prices for new vehicle were flat, used vehicles dipped 0.2 percent, while transportation services, reflecting a 1.0 percent jump in insurance rose 0.4 percent. When including motor fuel, transportation costs rose a very sharp 1.4 percent. Energy costs, jumped 2.8 percent and gasoline was up 6.3 percent, in part reflecting the month end pressure occurring because of Hurricane Harvey. Year on year rates are mixed with overall prices up 2 tenths to 1.9 percent but the core holding flat at a subpar 1.7 percent. Despite lack of progress in the core, August results are not a disappointment and will heat up support for the beginning of the unwinding of the balance sheet at next week’s FOMC.

Jobless Claims

Volatility in jobless claims data is assured in the coming weeks as the effects of Hurricanes Harvey and Irma play out at unemployment offices in Texas, Florida, and surrounding states. Initial claims fell back 14,000 to a 284,000 level that is on the low end of economists’ range of predictions. After rising more than 50,000 in the prior week, initial claims in Texas declined nearly 12,000. Continuing claims are steady but may begin to rise as some displaced workers collect extended benefits. In lagging data for the week of September 2nd, continuing claims fell 7,000 to 1.944 million with the unemployment rate holding at 1.4 percent.

Consumer Sentiment

Hurricanes Harvey and Irma cut into consumer sentiment but not by much. The preliminary sentiment index for September fell to 95.3 vs. 96.8 in August with weakness centered in expectations where the component fell 4.3 points to 83.4. The current conditions component showed strength as it rose 3 points to 113.9 for the best level in nearly 17 years. Inflations expectations are up 1 tenth for both the 1 years and 5 year inflation, at 2.7 and 2.6 percent respectively.

Freddie Mac Mortgage Rate

The Freddie Mac mortgage remained the same as the week prior at a level of 3.78% APR; for the second consecutive week of 2017 lows. APR still remains higher than it was a year ago when it was at a level of 3.50%, but the gap is shrinking on a yearly basis; it is only 28 basis points lower on a year on year basis than the current APR of 3.78%.

Attributed to Sean Becketti, chief economist, Freddie Mac.

“Following a sharp decline last week, the 10-year Treasury yield rose 11 basis points this week. The 30-year mortgage rate, however, remained unchanged at 3.78 percent. If Treasury yields continue to rise, mortgage rates could see an increase in next week’s survey.”