Capacity Utilization came in at 77.6 vs. estimates of 77.8 and previous of 78. This means there's lots of capacity for production, which is also a factor in keeping inflation low (in addition to the productivity numbers we've been getting recently) - the main reason the Fed raises rates is to slow inflation and the current rate of about .9% is well below their target rate of 2%. Industrial Production came in at -.4 vs. estimates of -.2 and previous of .9. This is another measure that shows a slow / weak economy and is favorable for interest rates (even though mortgage bonds are down right now). August Headline Retail Sales were .2 vs. estimates of .3 but July was revised from .6 to .7 so it's really a wash - the numbers are still weak and don't justify a rate hike.
The Labor Force Participation Rate: While the unemployment rate has been dropping recently, it doesn't even come close to telling the whole story. The Labor Force Participation Rate is at it's lowest in 38 years with a reading of 62.6 - which is to say that 62.6% of everyone over 16 is either employed or actively looking for a job. There were 5.4 million jobs available as of the end of May and recent JOLTS reports have the number continuing to hover around that mark. As of June, there were about 94,000,000 who weren't employed and weren't looking for work. There are a lot of reasons for this in addition to lots of philosophies as to why this is. A number of these people have retired and don't need to work while many people have become frustrated with trying to find a job and have given up looking. It's important to note that if you haven't been actively looking for a job for just four weeks, you are no longer counted in the unemployment rate which is one major reason why the unemployment rate has been decreasing. There's lies, damn lies and statistics (this doesn't typically apply to sports). The common question is why would someone who is unemployed stop looking for a job? The follow-up question is: With so many jobs available, how come the unemployed aren't becoming employed? Those looking for a job want one with a living wage that is in their area of expertise; a lineman unemployed from a power company doesn't want a much lower paying job at a grocery store stocking shelves (nothing against this job - it was my first job, along with cashiering). One of the possible answers to the 2nd question is that the available jobs may not be in the geographical location where the unemployed either live or want to move to (assuming that is even an option). Regardless of the "why" there are so many people unemployed - factoring out those who are retired and have sufficient income to support themselves - the fact is that this is a drag on the economy and a major reason why we haven't seen a robust recovery.
Mortgage bonds and interest rates: After closing down last Thursday and Friday, 21 and 9 basis points respectively, the 1st level of resistance shifted down 6 basis points to 103.77 with the 1st level of support at 103.66. The FNMA benchmark bond closed up 8 basis points yesterday closing at 103.72 but has given up all of those gains and then some this morning as it is currently down 15 basis points at 103.57. The trading range has been very narrow over the last couple of weeks as the traders have been waiting on the Fed decision this Thursday. Rates are still great in spite of the recent minor pull-back. I would absolutely lock ahead of the Fed decision (and tomorrow's CPI) and if the market rallies, I'd float the rate down. As someone once said - you can't unring a bell or un-see a bad picture; if you (or your clients) don't lock and mortgage bonds sell off based on the Feds decision, you are stuck at the worse rates. As always, feel free to contact me if I can help with anything mortgage-related (I also write and produce music so if you want to record a song or co-write something, that would be fun as well and I'm also always up for talking sports) - 702-812-1214 or 801-853-8720. Make it a great day.