Morning Report: Job openings rise

Vital Statistics:

S&P futures4,681-17.2
Oil (WTI)71.48-0.88
10 year government bond yield 1.48%
30 year fixed rate mortgage 3.35%

Stocks are lower this morning on no real news. Bonds and MBS are flat.

Initial Jobless Claims fell to 184k last week, which included the Thanksgiving Day holiday. Initial Jobless Claims had remained stubbornly high, but it looks like it might have finally turned the corner.

Meanwhile, job openings were close to record levels at 11 million. The quits rate edged down to 2.8% after hitting a high in September. The quits rate is one of the leading indicators of wage inflation, and we are certainly seeing evidence of wage inflation – witness the lousy productivity numbers from a couple of days ago.

Wage inflation will be the story for the Fed as it wrestles with inflation. Despite the strength of the labor market, numbers like the employment-population ratio and the labor force participation rate show that there is still additional supply in the labor market. These numbers represent people who were working before the pandemic, and are not now. The unemployment rate doesn’t count people who haven’t worked for over 6 months, so those folks are not reflected in that number.

Ideally, if the people who exited the labor force during the last 2 years come back, it could help alleviate the shortages we are seeing. A shortage of workers ultimately limits the potential economic output of the economy and acts as a governor on the economy. Faster growth then translates into higher inflation.

Homeowner equity increased 31% in the third quarter, according to CoreLogic. This is a $3.2 trillion increase. The average homeowner picked up about $57,000 in equity over the past year. Frank Martell, CEO of CoreLogic said “Not only have equity gains helped homeowners more seamlessly transition out of forbearance and avoid a distressed sale, but they’ve also enabled many to continue building their wealth. This financial reserve will be especially helpful for homeowners looking to fund renovation projects.“

This increase in homeowner equity means that refinance activity will not be entirely dependent on interest rates. Cash-out debt refinancings will remain a great source of loans and represent evergreen activity.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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