Hi Bill Bodnar here from the Mortgage Market Guide.
Thanks for tuning in to our MMG recap, so on the screen I have the Federal Reserve Bank of St. Louis and we’re showing the initial claims report, which was out on Thursday and you can see this 196,000.
And this is a really important number to track because what we’re seeing in this chart, you could see here, we’re making new cycle lows. We had gone sideways a bit and now we’re seeing new lows and in these let’s call them initial claims, which are fresh people seeking unemployment benefits.
This is a good thing, because if you’re not seeking benefits, you’re actually working, which is a great thing, and here’s another big takeaway for us: The market is now sensing that a recession is off the table.
This is a big deal and this is what as you know is giving the stock market a little bit of a lift as of late and it also has removed the fears of a Fed rate cut, so those are really, I think off the table because of this number right here. The initial claims for the last two weeks is getting real strong.
There’s also another benefit with initial claims: Obviously the labor market continues to remain very tight and will be tighter with this indicator getting stronger again.
This is a leading indicator and the final thing I would say is, you know if you look when we hit these troughs, this gray area is when the recessions hit. The average recession hits 13 months after the trough, so we’re still making lows.
We haven’t bottomed out yet, so let’s call a recession in 2019 off the table. Could it happen next year, and could things change quickly? And then in the foreseeable future? Possibly and so next week is a big one. We have to watch stock earnings or corporate earnings and those can be like the canary in the coal mine.
But obviously the big thing is their guidance. What do these corporate firms say about the
future? So we couple that with some of that initial jobless claims data.
Here is a chart of mortgage-backed securities heading into the weekend, you know we are right near 14-month highs which is a great deal. We’re looking a 10-year note, hovering around 250, not getting much better but still a fantastic story, and so go ahead and take this to your clients and your partner’s going into this week.