It’s Bill Rapp, the Mortgage Viking here, let me tell you about what the Good Ole Boys on Wall Street are talking about today…
Rates are on the rise this morning on reports that China is leaning towards reducing tariffs on U.S. cars – providing at least a short-term respite from trade concerns.
At one point yesterday the futures market was pricing in a total of 0 hikes in 2019 and cuts in 2020 and 2021, after Hedge Fund investors Paul Tudor Jones stated he believes the Fed won’t hike rates at all in 2019.
Yet, the risk-off sentiment has eased this morning and the market is back to pricing in 1 hike in 2019. In our view, the Fed will lower its 2019 rate forecast from 3 hikes to 2, but since this is well priced into the market, this would likely be a non-event.
The bigger story surrounds the neutral, or long-run “dot” – which currently lies at 3%. It remains very unlikely it gets revised higher, but there’s a chance that it is revised lower as a result of an assessment of tightening of financial conditions with rates at current levels and the slowing of business investment in recent months.
While JOLTS Job Openings data is quite delayed and often overlooked by the market, it does give important insight into the state of the labor market. The number of help wanted signs in the U.S. rose to 7.08 million in October, the second highest reading on record.
The number of job openings now exceeds the number of unemployed Americans by 1 million, indicating demand for workers was strong before November’s slowdown in payroll gains. To put that number in perspective, the number of unemployed workers exceeded the number of open jobs by 12 million in 2009.
The quits rate, which is used a barometer of worker confidence in finding higher wages elsewhere, fell to 2.3 percent from 2.4 percent, the first decline since January. Even with the decline in the quits rate, the results indicate workers are still willing to voluntarily leave because they’re confident of finding better employment or benefits elsewhere. The quits rate is closely watched by Federal Reserve policy makers as they monitor for signs of upward pressure on worker pay that may feed overall inflation.
I will leave you with this thought, only 14 Days left till Christmas!
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