Nobody Can Agree On What Unemployment Stats Are Telling Us & Conditions Have Improved For Home Buyers | (12.8.22)
“Any fool can know. The point is to understand.” - Albert Einstein
What You Need To Know Today:
• Unemployment continues to be a hot topic of discussion (even more so than usual) because there is a significant amount of disagreement/misinformation surrounding the various jobs reports regarding “job losses” and “jobs added.” I made a short video on the topic if you would like to hear my thoughts rather than read them. This morning, the Department of Labor released the latest initial jobless claims figures. These measure the number of individuals who filed for unemployment insurance for the first time over this past week. According to the DOL, 230,000 individuals filed for unemployment week-over-week in-line with the market expectation of 230,000 and above last week’s reading of 226,000.1
TL;DR — Initial jobless claims at market expectation (230,000) but above last week’s figure.
• Mortgage rates have moved back down and now sit at the lowest levels since September — in the context of ~6.29%. While there are many factors, much of the move is being attributed to revised economic data showing a significant drop in the cost of labor for Q3 2022.2 The Fed looks to labor costs when seeking evidence that inflation is being ingrained into the economy. In the context of today’s market environment, the drop in unit labor cost suggests that inflationary pressures are in fact being curbed due to their tight monetary policy so far this year. For prospective homebuyers, conditions are MUCH better today than they were ~8 weeks ago given that rates have dropped to multi-month lows and ~20% of U.S. home listings have seen price adjustments since last month. More house, for less capital cost.
TL;DR — Indications of curbing inflation have sent mortgage rates back to September levels. Conditions are much better for home buyers today than they were ~8 weeks ago.
Chart Of The Day:
Are you familiar with the “we have food at home” memes? They started as an internet series of jokes mocking the commonly shared experience of asking one’s parents for take-out food only to be told “there is food at home” often due to economic concerns over the cost of take-out food. Well, here’s the thing…. the joke is becoming reversed in reality as the velocity of inflation within grocery stores is outpacing the rising cost to eat at restaurants. It is literally becoming less affordable to eat at home. Now, I will admit that on a simple cost basis it is still cheaper (on average) to eat at home, however, as you can see below that spread is tightening. The bigger the spread between the green and black line the closer eating at home gets to costing as much or more than eating at a restaurant.
Consumer Price Index Comparison: Food at Home vs. Food Away (Restaurants)3
TL;DR — The rise of grocery store prices is outpacing the rising cost to eat out at restaurants.
Source: Department of Labor: Unemployment Insurance Weekly Claims Report
Source: U.S. Bureau of Labor Statistics: Productivity and Costs, 3Q 2022, Revised
Source: Fred Economic Data: St. Louis Fed. U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: Food at Home in U.S. City Average [CUSR0000SAF11], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CUSR0000SAF11, December 8, 2022.U.S. Bureau of Labor Statistics, Consumer Price Index for All Urban Consumers: Food Away from Home in U.S. City Average [CUSR0000SEFV], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CUSR0000SEFV, December 8, 2022.