Slowest Job Market Recovery Since WWII
“The combination of a better than expected nonfarm payroll for April and upward revisions for February and March eased concerns that the job growth had stalled and took stocks higher,” says James Frischling, President and Co-Founder of NewOak.
Nonfarm payrolls rose by 165,000 in April and the unemployment rate ticked lower to 7.5%, the lowest level since December 2008. The most positive aspects of Friday’s report were the revisions made to the two prior months where February was revised from an initial reading of 268,000 to 332,000 and March was revised from a paltry 88,000 to a minimally acceptable 138,000. The identification of an additional 114,000 jobs than initially reported softens the blow of what had appeared to be much weaker than expected jobs growth following a number of strong months.
March Fears Simmer in April
The March report brought on fears that the economy was about to enter a spring slowdown for the 4th year in a row. While the April report and associated revisions don’t change everything, it was enough to ease fears of a slowdown and take the markets higher.
While the April report was seen as good news by the markets, for the nearly 12 million people unemployed in the US, this is the slowest job market recovery since World War II. With across the board Federal budget cuts as part of the sequester and higher payroll taxes on employees, economic growth is likely to slow. In this environment, in order for Companies to protect the bottom line, a conservative approach to headcount may be what’s necessary and that doesn’t bode well for jobs creation.
Mortgage Industry Rebuilding – Robust Growth or Potential Bust?
“Housing and mortgage market’s gradual healing (according to some over exuberance) may be an indicator of a more robust U.S. economic recovery ahead despite continued concerns in Europe and parts of Asia,” says Ron D’Vari, CEO and Co-Founder of NewOak, an advisory and risk management solutions firm.
S&P 500 and Dow have both broken through important psychological barriers of 1600 and 15,000, respectively. These self-reinforcing trends have strengthened confidence in the American economy to be able to accelerate soon. The recent market momentum has been fueled by several factors including above forecast home sales, ECB interest cuts and consumer confidence rise.
That being said, less bullish investors are looking for further fundamental evidence to commit capital. One area for a leading signal is the residential mortgage market. A healthy and vibrant mortgage industry will be critical to propelling housing and related industries which could fuel a broader base robust economic expansion. Despite a barrage of regulatory changes that could dampen the residential lending activities, the mortgage industry has been relatively upbeat. The May 5-8th gathering of mortgage professionals in New York city at MBA’s National Secondary Market Conference & Expo is expected to attract a large and diverse group of professionals in residential and capital markets, mortgage originators, mortgage investors, investment bankers, rating agency professionals, risk managers, mortgage lenders, mortgage insurers, FHLB members, regulators, wholesale, correspondent and retail production executives, CMBS investors, buyers and sellers of distressed assets, mortgage brokers, warehouse lenders and securitizing banks.
The events title of “Be the Bull in a Bear Market” speaks a lot about the mood and the reality of the market. While the costs of administering the new mortgage and banking regulations are unknown, the industry is hoping they can address that if the volumes keep up. Of course this will depend on the housing markets keeping up its latest trends and Fed not spoiling the party anytime soon. While the market is betting on the bulls winning, a potential bust could arise if the Fed takes the punch bowl away too early, the compliance with regulations becomes unbearable, or the banks decide to pull back.”