The National Debt is currently: $19,109,639,132,587.00 is Higher by another 80 BILLION in the last week. The interest pay-out alone on the debt is 233 Billion per year! I post this so we will be aware of what we are leaving to our children.
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Try making an accurate economic forecast for 2017 when the next U.S. president could be anyone from Bernie Sanders to Donald Trump. Just as the 2016 race has stymied political prognosticators, it is also confounding the economites (my term for economists, think of a creature that ruffles its fur/feathers when its right and hides when wrong).
This is the primary reason most folks are fed up with our government and are voting for an outsider like Trump, as bold as he might be. President Barack Obama said last Friday that the February jobs report showed that the U.S. economy was “the envy of the world” and that “Republican presidential candidates should stop talking down the economy.” If we are the envy of the world then that doesn’t say much for the rest of the world.
Obama said in remarks to reporters ahead of a meeting of his economic team. “The facts don’t lie….America is pretty darn great right now.” Trump’s motto is “Make America Great Again.” While the Labor Department on Friday reported a strong (in relation to the last 8 years) 242,000 jobs created in February this is in no way indicative of a growing economy to be bragging about. If he’s referring to a 2.00% growth rate then this is a good number. But there are a certain number of new jobs needed to absorb population growth. More on this next week.
The president also said that he didn’t expect the unnamed candidates would change their “doomsday rhetoric” and said “his plans” to grow the economy have worked. Really??? The national Debt has doubled, and by 10 Trillion dollars. His comments mask some stubborn problems. One of the most acute is weak wage growth despite a sinking unemployment rate. Hourly pay has been rising just 2.1% a year since the recovery took root in 2010. By contrast, wages grew 3.2% annually during the 2001-2007 expansion and 3.2% in the 1991-2000 boom.
More than three-fourths of forecasters in a new Wall Street Journal survey say the presidential election has introduced more uncertainty than is typical from a change at the White House. While it doesn’t take a poll to tell me that, the stock markets have rebounded over the past month as economic reports bolstered the case that continued—though moderate—economic growth seems likely. The average survey respondent estimates the economy will grow about 2.4% this year and next and that the unemployment rate will fall to 4.6% in 2017.
We’ve been stuck in the current “growth” pattern for the last 7 years, or since Prez Obama took office. I would say that at an average real gross domestic product, GDP, (the output of goods and services produced by labor and property located in the United States) growth rate of about 1.88% (2009 thru 2015) is not growth, but treading water. The highest we’ve gotten is 3.00% back in 2010. Prior to this recent time period we averaged about 3.5% growth.
During this time period the Fed has kept short term rates at “0” and the Stock market (Dow Index) has gone from just over 6,000 to over 18,000. I’ve said this before, but the Fed has backed itself into a corner. If/when they raise rates they will have to do it when the economy is doing better or they risk a potential stock market correction. And I don’t see the economy improving any better than the stagnant 2.00% we’ve been stuck at since 2010, And when they do raise rates (to beyond 3.5%) corporate earnings will suffer due to interest rate expense. I thought we would’ve seen changes after the last election but we’ve gotten more of the same. A lot depends on the upcoming election. The Fed predicts the economy will trudge along at a 1.8% to 2.2% growth rate until at least 2018.
Most economites surveyed by The Wall Street Journal expect the Fed to leave short-term interest rates unchanged at its next two policy meetings, and next raise them in June. About 76% of business and academic economites polled in recent days said the Fed would next raise its benchmark fed-funds rate at its June 14-15 policy meeting, up from 60% in the February survey. Just 3% of forecasters predicted Fed Gods would lift rates at the March 15-16 meeting, down from 9% in the last survey. Asked to gauge the probability of a March rate increase, on average they said 12%.
In economic news this week; the fact that there has been no real “bad” economic data, and improvements in consumer spending and employment, is helping ease investors’ concerns about weak corporate earnings and worries that the country could be headed toward a recession.
Small-business owners turned slightly less confident about their economic prospects last month, with lackluster sales crimping margins and ongoing uncertainty over the economic outlook and political landscape pinching spending plans. The National Federation of Independent Business’s small-business optimism index, based on a survey sent to about 5,000 owners, slipped 1 point to 92.9, the lowest level in about two years. In 2015, the gauge averaged 96.1.
While overall consumer credit increased 3.6% in January, credit growth actually slowed as consumers cut back on credit card use, the Federal Reserve reported Monday. This is the smallest percentage increase since March 2013. It’s also a sharp deceleration from December’s 7.3%. The slowdown brought consumer credit below expectations. Total consumer borrowing, which does not include mortgage debt, now totals $3.5 trillion. Credit card borrowing declined 1.4% in January following gains averaging 7.5% over the past two months. This is the first decline since last February. The Economites often view credit card use as a proxy for consumer confidence. Non-revolving credit, which includes auto loans and student loans, grew 5.4% in January after a 7.4% gain in December.
The federal government ran a budget deficit of $193 billion in February, the Treasury Department reported Thursday, just slightly higher than the $192 billion recorded in the same month a year ago. The last time the government brought in more $$$ than is spent was in 2000. Total spending for the month was $362 billion, Treasury said, or 9% more than a year ago. Spending rose for interest payments on the public debt, Medicare and Medicaid benefits and veterans’ programs, among other budget areas. Receipts totaled $169 billion, up 21% from last February. Individual income and payroll taxes rose by 12%.
On the Real Estate front: On the national level; the National Association of Realtors gauge of pending home sales dipped 2.5% in January. Also NAR’s monthly gauge fell to 106.0 from an upwardly-revised 108.7 in December. It was the 17th straight month in which the index has been higher compared to a year ago, but that gain was only 1.4% in January. On the local level; pending sales in El Dorado County were higher by 58% from Jan to Feb and new listings were higher by 33% in the same period. The index tracks real estate transactions in which a sales contract has been signed, but the deal has not yet closed.
The decline probably reflects some impact from the massive blizzard in January, NAR said, but also the strong acceleration in home prices, along with lean inventory. “Some buyers could be waiting for a hike in listings come springtime,” NAR Chief Economist Lawrence Yun said in a statement. Sales of existing homes surged last month but prices also jumped, by 8.2%. NAR forecasts such sales will rise 2.5% over the 2015 tally in 2016, to 5.38 million. The group contends new home construction is needed to bring balance into the market.
On the Employment front: The number of Americans who applied for unemployment benefits fell by 18,000 in the first week of March, setting a five-month low of 259,000 and reflecting a low rate of layoffs in a steadily growing economy. Initial claims fell below the 300,000 threshold that signals a healthy labor market more than a year ago. They have remained under that mark since. New claims touched a 42-year low of 256,000 in October.
Stocks rallied today as investors reassessed the impact of the European Central Bank’s latest stimulus measures and the health of the U.S. economy. The Dow is higher by 217 points today/Friday and the highest of the year. The Dow is at 17,212. The S&P 500 is trading at 2,022. Gold is trading at $1,251 an ounce, while oil futures at $38.55 a barrel. Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $2.13/Gal.
The FNMA 30-year fixed 3.0% coupon (interest rates at which banks sell their loans into Fannie Mae), containing 3.25% – 3.625% mortgage rates, the benchmark or how rate sheets are priced these days is currently trading at 101.44. We are currently testing the support of the trading range. Our current trading range is about 101.50 to about 103.00. Each .50 change in the price of the security translates to about 0.125 in rate. Basically the change in the price of the security translates to the price (or points paid or credited) of the mortgage rate. The higher the number (price), the lower the rate.
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