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    Monday, October 11, 2010

    Sean La Rue's Weekly Newsletter: Is the Labor Market Showing Signs of Life... or Not?

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    Provided to you Exclusively by Sean K. La Rue
    “Your KEY to Moving Home”    

    For the week of Oct 11, 2010 | Vol. 8, Issue 41

    Sean K. La Rue

    Sean K. La Rue
    Senior Vice President
    Franklin Loan Center
    Office: 760-837-1488
    Cell: 760-835-5663
    Fax: 800-784-9089
    E-Mail: slarue@franklinlc.com
    Website: www.SeanLaRue.com

    Franklin Loan Center

    In This Issue

    Last Week in Review: The highly anticipated Jobs Report for September is in. What was the news... and what does it mean for home loan rates?

    Forecast for the Week: With the Meeting Minutes from the Fed’s last get together coming - as well as Retail Sales numbers, two inflation reports, and more Third Quarter earnings season ahead, a busy news week is in store!

    View: Texting while driving has become a hot issue... but it doesn’t have to worry you anymore. Find out why below.

    Last Week in Review

    "EVERYBODY’S WORKING FOR THE WEEKEND...." (Loverboy, 1981) Or... are they? Unfortunately, many folks out there these days sure wish they were working at all... and the Labor Department reported last Friday that the US lost 95,000 jobs in September. What else did the Jobs Report say and what could the news mean for home loan rates? Read on for details.

    A closer look at the Jobs Report for September shows that 159,000 of the jobs lost were government workers, many of which are the unwinding of the temporary census hires. The more important private sector added 64,000 jobs - but still not great, and also below the 74,000 expected. But this number confirms the thought that the economy, or the Job market, is stabilizing and perhaps even improving, albeit it at a very gradual pace. More on why this is so important in a minute.

    The Jobs Report also showed that the Unemployment Rate remained at 9.6%, just below the 9.7% anticipated. However, it’s likely the actual rate of unemployment is higher. Why? Because if an unemployed individual does not seek employment for four weeks, they are removed from the count of the "officially unemployed." And with unemployment benefits available for about 2 years, it increases an unemployed individual's chances of becoming less motivated to look for a job, until the benefits are close to running out.

    This can skew the headline Unemployment Rate, and is evidenced by the sharp rise in the overall unemployment rate or "U6" measurement of unemployment, which stands at 17.1%. The U6 rate accounts for these discouraged workers who have not sought employment for the past four weeks, as well as those who have accepted part-time employment but would prefer to be working full-time.

    Now, back to the question of why signs of good - or bad - economic news are particularly important of late. The Fed will be watching the various economic reports very closely over the next few weeks in advance of their next regularly scheduled meeting on November 2-3, as they are considering a second round of Quantitative Easing (QE2) to ensure that our slowing economy does not slow even further. If the economic reports that are ahead are more negative than positive, this will increase the likelihood of more QE... but it’s not a foregone conclusion at this point in the least.

    So what does all this have to do with home loan rates? If the economic news continues to be soft and the Fed does go through with another round of QE, Bond prices and home loan rates may initially improve for two reasons. First, if the economic data is weak leading up to an announcement - that soft economic news tends to be bad for Stocks, but good for Bonds and therefore home loan rates. Additionally, Bonds would improve simply because the announcement of QE would include large Bond purchases. But keep in mind that the key word is "initially." Even though Bonds and home loan rates could initially improve, the eventual softening of the Dollar, rising commodity prices, and rise in Stock prices would become a drag on Bonds, which would negatively impact home loan rates.

    We’ll see what happens in the coming weeks leading up to the Fed’s next meeting on November 2-3. But last week, meanwhile, the news had a positive impact on Bonds and home loan rates, as they ended the week about .125 to .25 percent better than where they began.

    If you or anyone you know would like to learn more about taking advantage of historically low home loan rates, please don’t hesitate to call or email me as soon as possible. Or forward this newsletter on to anyone you think may benefit and I’d be happy to talk to them free of charge.

    FINDING IT HARD NOT TO TEXT AND DRIVE? YOU CAN DO IT SAFELY…THANKS TO THIS GREAT NEW APP. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW FOR DETAILS.

    Forecast for the Week

    It may be a short week in the Bond Market, with the market closed Monday for the Columbus Day holiday (the Stock Market will be opened), but there will still be plenty of news to work through. On Tuesday, we’ll get a look at the Minutes from the Fed’s September 21st Meeting, and these may give us even more information about which way the Fed is leaning in the QE department.

    A double dose of inflation news ends the week, with the Producer Price Index on Thursday (which measures inflation at the wholesale level) and the Consumer Price Index on Friday. Remember, inflation is the archenemy of Bonds and home loan rates, so any hint that inflation is increasing could cause home loan rates to worsen.

    Two other reports to note include Thursday’s Initial and Continuing Jobless Claims (last week’s report, while not great, was slightly better than expected) and Friday’s Retail Sales Report. In addition, third quarter earnings season kicks into full gear this week. Some reports to look for include JP Morgan Chase and General Electric, reporting respectively Wednesday and Friday before the markets open.

    Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

    As you can see in the chart below, Bonds and home loan rates hit record levels as the talk of QE2 continued. I’ll be listening closely for the latest developments on that front this week.


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    Chart: Fannie Mae 3.5% Mortgage Bond (Friday, October 8, 2010)

    The Mortgage Market Guide View...

    Safer Driving... There’s an App for That!

    A recent study by the National Highway Traffic Safety Administration found that distracted driving was the leading cause in 448,000 accidents and 5,474 highway deaths in 2009. That represents a 16% increase from 2008.

    That increase is one reason why U.S. Transportation Secretary Ray Lahood has proposed mandatory warnings in automobiles about distracted driving. Lahood, like many parents today, is concerned about the growing increase of technology use in automobiles - including distractions that are being added to new cars that allow "drivers to update Facebook, surf the Web or do any number of other things instead of driving safely," Lahood said.

    Even without such built-in technology, drivers today are often distracted by incoming text messages on their cell phones. The good news is that technology can also help solve this problem. New services - like DriveSafe.ly - have sprung up that eliminate the need to read text messages AND eliminate the need to respond.

    Here’s how it works... You download an application to your phone. Then, when you get in your car to drive, you simply turn the application on. When you receive a text message, the application actually reads it to you... automatically... and out loud. So there’s no need to take your eyes off the road.

    Better still... the application automatically sends a reply message stating that you are driving and will respond as soon as you reach a destination that allows you to safely reply.

    The application can be used on a variety of phones and there are even different plans - including a free version of DriveSafe.ly as well as family and business plans.

    If you receive a lot of text messages while driving or if you have a teenager of driving age, this could be one of the most important safety steps you do this year. Take a few minutes to check it out.

    After all, this simple application could save your life or the life of someone you know.


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    Economic Calendar for the Week of October 11-15, 2010

    Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

    Economic Calendar for the Week of October 11 - October 15

    Date

    ET

    Economic Report

    For

    Estimate

    Actual

    Prior

    Impact

    Tue. October 12

    02:00

    FOMC Minutes

    9/21

     

     

     

    HIGH

    Thu. October 14

    08:30

    Jobless Claims (Initial)

    10/9

    449K

     

    445K

    Moderate

    Thu. October 14

    08:30

    Producer Price Index (PPI)

    Sept

    0.2%

     

    0.4%

    Moderate

    Thu. October 14

    08:30

    Core Producer Price Index (PPI)

    Sept

    0.1%

     

    0.1%

    Moderate

    Thu. October 14

    08:30

    Balance of Trade

    Aug

    -$44.5B

     

    Posted via email from Sean La Rue's Posterous

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