Posted by: cfigueira | November 4, 2010

Mortgage News:

Key Economic News:

Reports today on Monster index, initial claims, productivity and cost.

The Monster index of on-line job advertising fell two points in October. This was also a two-point loss after seasonal adjustments. Although the index is still about 13% above its year-earlier level, since June it has dropped 5% in seasonally adjusted terms and 31/2% in unadjusted terms.

Claims disappoint; Productivity better; Reducing Oct payrolls to +25k; Private still at +75k
Initial claims reverse the previous week’s decline while continuing claims keep trending lower. Claims for extended benefits rise sharply. Revising total nonfarm payrolls to +25k from +50k, private stays at +75k. Productivity firmer than expected as increases in hours worked are smaller implied by monthly data.

Key Numbers:
Initial claims up 20k to 457k in week ended Oct 30 vs. median forecast 442k.
Continuing claims down 42k to 4.34 mm in week ended Oct 23 vs. median forecast 4.378mm.
Nonfarm productivity +1.9% in Q3 (qoq, annualized, +2.5% yoy) vs. median forecast +1.0%.
Unit labor cost -0.1% in Q3 (mom, -1.9% yoy) vs. median forecast +0.6%.

Main Points:
1. Following last week’s surprise decline, initial claims increase by 20k to 457k in the week ended Oct30. (Initial claims in the prior week were revised up by 3k). Continuing claims declined by 42k to 4.34mm in the week ended Oct 23, but from an upward revised level. (Continuing claims in the previous week were revised up by 26k). Extended benefits-which are not seasonally adjusted-rise by 357k in the week ended Oct 16.
2. With all the data now in hand, we are reducing slightly our call on total nonfarm payrolls in October to +25k from +50k. Our estimate of the private-sector change remains at +75k. Most of the 50k difference is due to an expected additional loss of state and local jobs.
3. Productivity was firmer than expected in Q3 as hours worked rose less than indicated by the monthly data. The firm year-to-year trend, at 2.5%, illustrates why job growth is so sluggish in an economy that has grown only slightly more over the past year. Meanwhile, unit labor costs edged down in Q3 as total compensation was about in line with the 3% annualized growth rate in nonfarm output reported for Q3. Once upon a time, flat to falling unit labor costs were regarded as a good thing…

16:30: Federal Reserve balance sheet…Yesterday the FOMC told us the balance sheet, currently just under $2.3 trillion, is heading to about $2.9 trillion by mid-2011. The increase should start in the second half of November.

Advice:

With the ECB keeping rates at a record low and not following the Fed with further easing, has caused the dollar to slide, and Oil increase to over $86 dollars per barrel. And with today’s news coming out mainly weaker than expected, we should see the market rally today.

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