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March 3, 2000
No matter what the newspaper says -- time-lagged surveys are a terrible disservice to consumers -- mortgage rates this week have dropped to the lowest level since December, roughly 8.25% on the lowest-fee deals.
The proximate cause of this decline in rates is today's surprise report of a softening job market -- or at least the appearance of softness, which has the stock market again roaring off into never-never land.
Payrolls, expected to have grown by 220,000 jobs in February, instead rose only 43,000; and the unemployment rate rose from 4.0% to 4.1%. The Buzz Lightyear types immediately assumed that this apparent weakness is a sign of a slowing economy and will cause the Fed to hold off, or at least minimize any future action.
The world is once again safe for stocks.
At mid-day in New York, the Dow is up 267 points, trading above 10,400 (from 9,800 in a week), the Nasdaq is up 122 to 4,876, a new record high. Ho-hum, new week, new record: the Nasdaq has doubled in six months.
To infinity, and BEYOND!!!
Maybe, maybe not.
The rise in the unemployment rate was predicated on an increase in the workforce during February -- 1,200,000 new workers added to the labor pool.
Do you believe that?
I don't believe that. The "addition" was based on notoriously inaccurate seasonal adjustments.
The first day at a trading desk they teach you not to quibble with the economic data: it is what it is. So, is there support for quibbling with the Labor Department?
In a survey released today by Manpower, Inc., 16,000 U.S. firms said they intended to hire more people in the April-June quarter than in any quarter in 21 years. Manpower's president: "The personnel shortage continues to plague companies in all industries."
Is the economy slowing down? February automobile sales reached the second-highest monthly total... ever. Construction spending in January was expected to rise by a negligible one-tenth percent -- suppressed by "high" interest rates -- and instead surged 2.7%.
On the inflation front, the employment data still do not show any wage spiral, but the Purchasing Managers' Association reported a five-year high in price increases: 74% of purchasing managers paid higher prices in February than in January.
Skeptic, bearish worrywart that I am, until advised otherwise, I assume the Fed will tighten on March 21, and the mortgage market is less prepared for the Fed's intentions than it was a week ago.
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