Happy New Year - I think???
I remember at the end of 2009 how everyone could not wait until 2010 got going. Everyone knew it was going to be a better year. What I found interesting is that the majority of people I spoke with are not sure if 2011 is going to be better than 2010, so there just seems to be a little less fanfare this year.
Expectations at least from a corporate side do seem to be far better than last year. As you have seen me write many times, corporate profits are up, overall sales as well as manufacturing are also increasing at a steady pace.
We know that housing continues to remain a drag on the economy and that is not expected to change in the near future. Typically people say that in order for the economy to improve, housing must lead the way. It has become clear that this time around, it will work in the opposite direction. Corporate profits and the reduction of unemployment will lead to the recovery in housing.
The bright side of housing is that the free fall of home values has ended so we are dealing with at least some semblance of stability. There are some doomsday advocates that are suggesting home values may continue to drop in 2011 however I am of the belief that the worst is definitely over.
The FOMC minutes released this week clearly indicated that the members are actually more optimistic about the recovery than they indicated in their statement a couple of weeks ago.
The Mortgage Bankers Association released their mortgage application report for the last 2 weeks on Wednesday as well. The last 2 weeks of the year purchase applications were up 3.1% and down .8% respectively. Refinance applications have been showing their sensitivity to the movements in rates. Refinance applications were up 3.9% and then down in the final week 7.2%. If you chart the movement of rates over the last month, you will easily see just how rate sensitive refinance borrowers are.
First time jobless claims rose back over 400,000 however the markets did not seem to pay this much mind as everyone was waiting for the national unemployment numbers that were released today. And here they are...
According to the government nonfarm payrolls increased by 103,000 which continues the trend of hiring that we have seen for the last few months. This latest report drops the national unemployment rate from 9.8% to 9.4%. The report is a positive sign for unemployment and hopefully the better than expected report will do some good from a psychological aspect. If people believe the employment picture is getting better, they will act as if it is, which will build momentum towards recovery. (By the way the ADP Employment Report released this week called for an increase in private payrolls of 297,000. Hmm - they were not even in the ballpark)
Reports due out for the first week of 2011 are:
• Wednesday January 12th - 10 YR Note Auction & MBA Mortgage Applications
• Thursday January 13th - First Time Jobless Claims & Producer Price Index
• Friday January 14th - Consumer Price Index, Retail Sales, Industrial Production, Consumer Sentiment
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