Pentonomics – Fence Sitters Jump In

January 20, 2011 at 5:39 PM

The number of Americans filing first-time claims for unemployment insurance payments fell 37,000 in the week ended Jan. 15, the biggest decline since February 2010, to 404,000, figures from the Labor Department showed today. The four-week moving average dropped to 411,750 from 415,750. While the trend in claims is no doubt headed in the correct direction, it is important to stress that the current level of initial unemployment claims is still above the trailing 10 year average of 396,486. That fact is amazing given the massive number of layoffs which occurred during the last 3 years. So layoffs are still above trend and hiring is below trend. Those are the facts.

The big jump in mortgage rates caused the bulk of fence-sitters to jump into the real estate market. Existing Home Sales jumped 12% to reach a 5.28mm annualized rate. However, home sales dropped YOY and median prices were also down 1% from the year ago period. For all of last year, purchases decreased to 4.91 million, the fewest since 1997. Those who were timing the bottom of interest rates to buy a house have now made their commitment. Therefore, the real estate market is set to take another dip down as rates continue to rise and the economy and job creation continues to stagnate.

The Philly Fed came in at 19.3 for January, which declined from the previous reading of 20.8. The bigger news here was the rise in the prices paid component, which increased to 54.3 from 47.9 and was the highest reading since July of 2008.  Slow growth and inflation will remain with us until the next crisis arrives in just a few years time. Which, we should all know by now will consist of a U.S. sovereign debt and dollar crisis.

-Michael Pento