2018 Year End Economic Update

New York Stock Exchange
New York Stock Exchange
New York Stock Exchange

2.6 million new jobs were added in 2018 as unemployment dropped to a 40-year low – The Bureau of Labor Statistics reported that U.S. employers added 312,000 new
jobs in December. This shocked analysts that had forecasted 178,000 new jobs. 
There were 2.6 million jobs added in 2018, up from 2.2 million new jobs in 2017. The unemployment rate rose to 3.9% from 3.7% in November, a 40-year low, as 419,000 new workers entered the workforce. Optimism about finding an acceptable job and
higher wages were credited with expanding the workforce. Wages rose 3.2% from
one year earlier, matching October’s year over wage gains which marked the largest
year over year wage gain since April 2009. 

Stock markets ended the year lower in 2018 – After hitting all-time highs in
September, which marked the longest bull market in history, stocks took a downturn in the last quarter of the year. December marked the worst December drop since the Great Depression as fears of a trade war, political uncertainty, slowing economic activity overseas, and higher interest rates made investors more cautious. The Dow Jones Industrial Average ended 2018 at 23,327.46, down from 24,719.22 at the close of 2017.The S&P 500 closed the year at 2,506.85, down from 2,673.51 at the end of 2017. The NASDAQ closed at 6,635.28, down from 6,903.39 on December 31, 2017. 

U.S. Treasury Bond Yields higher in 2018 – The 10-year U.S. treasury bond closed the year at a 2.69% yield, up from 2.40% on December 31, 2017. The 30-year treasury yield ended the year at 3.02%, up from 2.74% on December 31, 2017.Mortgage Rates higher in 2018 – The December 28, 2017 Freddie Mac Primary Mortgage Survey  reported that the 30 year fixed mortgage rate average was 4.55%, up from 3.99% on December 29, 2017. The 30-year fixed rate was over 5% in October before
declining in November and December. The 15-year fixed was 4.01%, up from 3.44% . last December. The 5-year ARM was 4.00%, up from 3.55% at the close of 2017. Fortunately, rates dropped in the final quarter. The 30-year hit 5% in September. 

Year over year price gains moderated in 2018 after 7 years of price gains. For the first 7 months of the year we saw the same month year over year price increases of
6-8%, but by years end those prices were just 1.5% above the same month one year earlier – The California Association of Realtors reported that existing home sales 
totaled 372,260 in December on a seasonally adjusted annualized basis. That was 
down 11.6% from last December. It marked the fewest sales in a month since January 2015. The statewide median price was $557,600, up 1.4% from December 2017.
On a regional basis Los Angeles County’s median-price of $588,140 was up 1.8% 
from last December. Orange County had a median price of $785,000, down 0.1%
from December 2017. Ventura County’s median price of $640,000 was down 0.8% from last December. Inventory levels also continued to rise. Active listings have
increased 30% from 2017. The unsold inventory index hit record lows before moving up steadily in the last 9 months of 2018. There was a3.5-month supply of homes
listed in California, up from a 2.5-month supply in December 2017. It should be noted that a “normal market” has a six-month supply of homes listed, so inventory levels
which are well above the all-time lows of 2017 are still at low historical levels.
 Los Angeles County had a 3.5-month supply, up from a 2.4-month supply last
December. Orange County had a 4-month supply, down from 2.6 months last
December. Ventura County had a 5.5-month supply, up from a 4-month supply in
December 2017.

Economic update for the week ending March 26, 2016

la-nyse-photo-20160115Stocks slightly lower this week – Stocks pulled back after five members of The Federal Reserve’s Open Market Committee suggested that the next rate hike could come as early as the April meeting. This was a change to the statements made just a month ago when the economy seemed like it was faltering. Over the last six weeks stocks have rebounded. The 2015 4th quarter U.S GDP has been revised upward twice, auto sales were a record high, and consumer spending was higher than expected. Job gains were especially strong in February after a disappointing January. The general mood of economists has shifted from the economy possibly slowing to the economy is still expanding over the past month, as has The Fed’s outlook, apparently. Speculation of a rate hike coming strengthened the dollar, which has dropped from multi year highs in recent weeks. This is not especially good for manufacturing as a strong dollar makes U.S. goods more expensive. Oil prices retreated a little this week after rising 40% from a 13 year low on February 11 when U.S crude oil hit $26 a barrel. Oil was over $40 a barrel early in the week before dropping back to end the week at $39.46. Low oil prices have hurt energy companies, and energy producing areas where companies have cutback on production and laid off workers. After six weeks of gains stocks retreated a little this week. The Dow Jones Industrial Average closed the week at 17,515.33, down from 17,602.30 last week. The S&P 500 closed the week at 2,035.94, down from 2,049.58 last week. The NASDAQ closed Friday at 4,773.50, down from 4,795.65 last week.

Bond yields almost unchanged for the week – The 10 year U.S. Treasury bond closed Friday yielding 1.91%, slightly higher than 1.88% last week. The 30 year U.S. Treasury bond closed Friday yielding 2.67%, almost unchanged from 2.68% last week. Mortgage rates follow bond yields so we watch bonds carefully.

Mortgage rates -The Freddie Mac Primary Mortgage Survey released on March 24, 2016 showed that average mortgage rates from lenders surveyed for the most popular products were as follows: The 30 year fixed average rate was 3.71%. The 15 year fixed average rate was 2.96% The 5/1 ARM average was was 2.89%.

California existing home sales show mixed results in February – The California Association of Realtors reported that the number of California home sales in February was up 2.6% from January, and 6.4% above last February’s levels. The Los Angeles region showed almost identical increases as the state as a whole. Tempering the report was home prices. The statewide median price fell 4.7% in February from January and year over year the median price was up just 3.8% from last February. Inventory levels which hit record lows of a 3 month supply just a few months ago have increased. The unsold inventory index rose to a 4.6 month supply in February as more homes have hit the market. The unsold inventory index was at a 4.9 month supply last February before edging down as sales increased in the spring.

U.S. Existing home sales fall sharply in February – The National Association of Realtors reported that month over month total existing home sales dropped 7.1% in February. On a positive, home sales were 2.2% higher than last February’s levels. The drop was most significant in the Northeast and Midwest which weighed down the national numbers. Weather was thought to have played a part as a massive snow storm in the east may have slowed sales. Low inventory levels, were also to blame according to the report.

New home sales jump in February – The Commerce Department reported that the number of sales of new homes surged 38.5% in the Western United States. All other regions declined and the country as a whole showed new home sales up 2% in February. Obviously, strong sales here in the west pulled that number positive.

Have a great weekend,


Economic update for the week ending March 4, 2016

U.S. Employers add 242,000 jobs in February – The Labor Department reported that U.S. Employers added 242,000 new jobs in February. This was far better than the 190,000 new jobs economists surveyed had predicted. It was also viewed as a very positive sign after a disappointing 172,000 jobs added in January. It was feared after the low January report that job growth could be stalling, but the February number of 242,0000 net new jobs put the 2016 average job gains numbers back to over 200,000 per month. The national unemployment rate held steady at 4.9%, the lowest level since February 2008. Wage growth was disappointing showing hourly wages up just 2.2% from last February. Wages were looking like they were beginning to rise over the last few months, after being stagnant for years, so this was a disappointing number. The Federal Reserve has a wage growth target of 3.5%.

California Unemployment Rate drops to 5.7% in January – The Employment Development Department reported that California’s unemployment rate slipped in January to 5.7%, down from 5.9% in December. Year over year non farm payrolls increased by 444,900 from last January when the state’s unemployment rate was 6.8%.

Stock markets rise for third straight week – Stocks rose again this week as rising oil prices bolstered energy stocks, and the outlook of economics in oil producing regions. Oil prices have risen 30% from their February lows. A strong jobs report showed that U.S. Employers’s are still confident and expanding, which also helped stocks on Friday after the report was released. The Dow Jones Industrial Average closed the week at 17,006.77 up from 16,391.99 last week. The S&P 500 closed the week at 1,999.99 up from 1,948.05 last week. The NASDAQ closed Friday at 4,717.02 up from 4,590.47 last week.

Bond yields – Bond yields have risen slightly since hitting historically low levels in mid February. It’s not unusual for bond yields to rise as stocks rise as investors sell bonds to buy stocks. The 10 year U.S. Treasury bond yield closed Friday at 1.88% from 1.76% last week. The 30 year U.S. Treasury bond yield closed Friday at 2.70% from 2.63% last week.

Mortgage rates -The Freddie Mac Primary Mortgage Survey showed that average rates on February 25, 2016 were as follows: The 30 year fixed average rate was 3.64%. The 15 year fixed average rate was 2.94%. The 5/1 ARM average was was 2.84%.

Have a great weekend!