Saturday, November 25, 2006
Tuesday, November 21, 2006
Last Week in the News
Led by big declines in auto and gasoline costs, producer prices fell 1.6% in October, tying the record decline set in October 2001, the Labor Department reported November 14. Core producer prices -- excluding energy and food -- fell 0.9%, the largest retreat in 13 years. Economists expected producer prices to fall 0.5% and the core rate to rise 0.1%.
Consumer prices fell a bigger-than-expected 0.5% in October, following a similar decline in September. Analysts had predicted a 0.3% decrease. Core consumer prices -- minus energy and food -- rose 0.1%, the slowest pace in eight months. The Consumer Price Index is up 1.3% in the past year, the slowest rate of inflation since June 2002.
Retail sales slid 0.2% in October, largely due to plunging prices at the gasoline pump, the Commerce Department said November 14. Excluding gasoline sales, retail sales would have been up 0.4% in October.
Construction of new, single-family homes and apartments fell 14.6% in October to an annual rate of 1.486 million units, the lowest level in more than six years, the Commerce Department reported November 17. Applications for new building permits declined 6.3% to a seasonally adjusted rate of 1.535 million, the lowest level in nine years.
Sparked by falling interest rates, mortgage applications increased 4.3% in the week ending November 10, the best showing since January of this year, the Mortgage Bankers Association reported November 15.
Initial jobless claims decreased by 2,000 in the week ending November 11, suggesting the labor market remains favorable, the Labor Department said November 16.
This week look for updates on leading economic indicators on November 20.
Consumer prices fell a bigger-than-expected 0.5% in October, following a similar decline in September. Analysts had predicted a 0.3% decrease. Core consumer prices -- minus energy and food -- rose 0.1%, the slowest pace in eight months. The Consumer Price Index is up 1.3% in the past year, the slowest rate of inflation since June 2002.
Retail sales slid 0.2% in October, largely due to plunging prices at the gasoline pump, the Commerce Department said November 14. Excluding gasoline sales, retail sales would have been up 0.4% in October.
Construction of new, single-family homes and apartments fell 14.6% in October to an annual rate of 1.486 million units, the lowest level in more than six years, the Commerce Department reported November 17. Applications for new building permits declined 6.3% to a seasonally adjusted rate of 1.535 million, the lowest level in nine years.
Sparked by falling interest rates, mortgage applications increased 4.3% in the week ending November 10, the best showing since January of this year, the Mortgage Bankers Association reported November 15.
Initial jobless claims decreased by 2,000 in the week ending November 11, suggesting the labor market remains favorable, the Labor Department said November 16.
This week look for updates on leading economic indicators on November 20.
Monday, November 06, 2006
Ruling Out Nothing
Although fixed mortgage rates dropped by a dozen basis points this week to land at 6.38%, you shouldn't expect them to wait there for long, according to the latest data from the nation's leading survey of mortgage pricing. Hybrid 5-1 ARMS tripped lower, too, easing 13 basis points to close the survey period at 6.16%. Both figures are close to their year's low.
Rates wended their way down this week in a fairly steady fashion, as each piece of soft economic data seemed to make it more likely that the next Fed move would be to cut interest rates amid a slowing economy. The low point for yields came Wednesday, when the benchmark 10-year Treasury hit 4.57% on news that the Institute for Supply Management (ISM) missed meeting expectations by a fair margin. The ISM index tracks manufacturing activity and denotes a reading of 50 as the breakeven level, so it was little wonder that the markets took notice that October's ISM index fell to 51.2 for the month, the lowest since June 2003. One bright spot in the report was that for the first time in quite a while, the number of companies reporting lower input prices was greater than those reporting higher input prices. While we know that many commodity costs have eased off their highs, this suggests that steady-to-lower inflation has begun to work its way into the production stream.
This should be good news; according to Economics 101, easing growth lowers demand for resources and lower demand for resources cools price pressures, at least for commodities and energy costs. Easing growth should also serve to lower demand for labor, a different kind of resource, but commodities and human capital demands don't necessarily have arcs which start at the same time or progress in the same way. The Fed has expressed concerns about "resource utilization" which obviously includes human capital, and news this week suggests that they should remain concerned.
For example, one question is whether the arc of prior inflation is working its way into wages. It is, according to the quarterly Employment Cost Index, at least to the largest degree since the second quarter of 2004. The ECI for 3Q06 rose by 1.0%, a little above expectations, with the complete cost of having an employee on the books pressed higher by benefit costs. The ECI has risen by 3.3% over the past year; while still mild by most measurements, the direction continues upward.
Buttressing concerns over labor growth and costs was the monthly Employment Report for November. The 92,000 new hires were a little weaker than forecasts, but since layoffs have been slow, hiring should be expected to be as well. However, the markets were unprepared for sizable revisions to both September and, especially, to August payroll growth. September was revised up to 148,000 new hires, which August was pushed up to 230,000. Both revisions point to a much healthier job market than was originally reported, as witness that the nation's unemployment rate slipped to 4.4% -- the lowest reading since 2001. Perhaps hiring is weak not because the economy is weak, but because there are few qualified people available to hire? This would also dovetail nicely with the muted levels of layoffs; it stands to reason that you won't fire someone unless you believe that can replace them.
Layoffs are low, according to the latest Challenger, Gray and Christmas survey which found only 69,177 workers slated to lose their jobs in workforce reductions announced in October. That's down from 100,315 in September, and comparable with the lowest levels of the year. However, during the week ending October 28, there was a slight uptick in applications for new unemployment benefits, with 327,000 new filings, up from 309,000 the week before. Some of those filings are probably related to the fall in homebuilding activity. Construction Spending of all types fell by 0.3% in September, but spending for residential projects fell by 1.1% and has now been posting negative numbers for six months.
There's nothing economically wrong with a strong employment base, provided there are at least some offsets for higher wage and benefit costs. Provided worker productivity is rising, workers can be paid more in wages and benefits without businesses needing to raise prices of goods and services in order to afford them. That said, all-important productivity growth vanished in the third quarter of 2006, where no gain was reported; forecasts hoped for an increase in productivity to 1.3% for the period. The cost of labor per unit produced rose by 3.8% for the quarter, somewhat above the hoped-for level. Less productive workers and rising labor costs are not what the Fed has been hoping to see as they work to contain not only inflation today, but expectations of inflation in the near and not-so-near future. It is because labor costs remain an issue that additional rate increases by the Fed cannot yet be ruled out.
Wage growth helped to move Personal Income growth higher by 0.5% in September, up from August's 0.4% lift. Spending, though, rose by just 0.1% for the month, and the combination of the two helped move the nation's savings rate to -0.2% -- the closest to zero it has been all year. The inflation component of the report revealed a 'core' Personal Consumption Expenditure (PCE) index of 2.4% for the month, still above the range believed to be the Fed's preferred mark.
Having a job amid falling gasoline costs is a recipe for a sunny mood, and according to the weekly ABC News/Washington post survey of Consumer Comfort, consumers are happier than they've been in about three years: the Consumer Comfort index stormed higher to close the week of October 29 at -3. That expansive happiness didn't seem to infect those surveyed by the Conference Board during October, as their reading of Consumer Confidence mostly held steady, sporting a reading of 105.4, about the same as September.
Businesswise, while the ISM manufacturing survey was weaker, the ISM series which follows service-related industries noted a pickup in activity, with the ISM services index climbing to 57.1 in October from 52.9 in September. September's reading was a pretty substantial plummet from August, and the October number recovered all of that decline. As with the manufacturing series, input prices reflected here were on the downside, as well.
It's not unusual for bond and stock markets to get caught leaning the wrong way, but this week was a little unusual. Yields finished the week just a little above where they began, but it's a reasonable expectation that investors are at least a little chagrined for the moment. Hard bets that the economy is heading to free fall keep being dashed, and wagers on a more-docile Fed seem likely to suffer the same fate for at least a while longer. The period of slow growth necessary to fully overwhelm inflation pressures which took several years to build has been with us for only perhaps a quarter, and we are likely to see several more with weak growth but still-tough inflation ahead. Until that weak growth serves to trim payrolls back to produce some human "resource slack" the Fed does remain "in play" to increase rates.
Not next week, though. It's election week, when all manner of confusing messages about the economy will be blathered forth. Next week's a considerably quieter week in terms of new data, but like the ISM service numbers above, will probably see mortgage rates take back all of this week's decline, so we'll probably end up back near 6.5% as a result.
Get out and vote!
Rates wended their way down this week in a fairly steady fashion, as each piece of soft economic data seemed to make it more likely that the next Fed move would be to cut interest rates amid a slowing economy. The low point for yields came Wednesday, when the benchmark 10-year Treasury hit 4.57% on news that the Institute for Supply Management (ISM) missed meeting expectations by a fair margin. The ISM index tracks manufacturing activity and denotes a reading of 50 as the breakeven level, so it was little wonder that the markets took notice that October's ISM index fell to 51.2 for the month, the lowest since June 2003. One bright spot in the report was that for the first time in quite a while, the number of companies reporting lower input prices was greater than those reporting higher input prices. While we know that many commodity costs have eased off their highs, this suggests that steady-to-lower inflation has begun to work its way into the production stream.
This should be good news; according to Economics 101, easing growth lowers demand for resources and lower demand for resources cools price pressures, at least for commodities and energy costs. Easing growth should also serve to lower demand for labor, a different kind of resource, but commodities and human capital demands don't necessarily have arcs which start at the same time or progress in the same way. The Fed has expressed concerns about "resource utilization" which obviously includes human capital, and news this week suggests that they should remain concerned.
For example, one question is whether the arc of prior inflation is working its way into wages. It is, according to the quarterly Employment Cost Index, at least to the largest degree since the second quarter of 2004. The ECI for 3Q06 rose by 1.0%, a little above expectations, with the complete cost of having an employee on the books pressed higher by benefit costs. The ECI has risen by 3.3% over the past year; while still mild by most measurements, the direction continues upward.
Buttressing concerns over labor growth and costs was the monthly Employment Report for November. The 92,000 new hires were a little weaker than forecasts, but since layoffs have been slow, hiring should be expected to be as well. However, the markets were unprepared for sizable revisions to both September and, especially, to August payroll growth. September was revised up to 148,000 new hires, which August was pushed up to 230,000. Both revisions point to a much healthier job market than was originally reported, as witness that the nation's unemployment rate slipped to 4.4% -- the lowest reading since 2001. Perhaps hiring is weak not because the economy is weak, but because there are few qualified people available to hire? This would also dovetail nicely with the muted levels of layoffs; it stands to reason that you won't fire someone unless you believe that can replace them.
Layoffs are low, according to the latest Challenger, Gray and Christmas survey which found only 69,177 workers slated to lose their jobs in workforce reductions announced in October. That's down from 100,315 in September, and comparable with the lowest levels of the year. However, during the week ending October 28, there was a slight uptick in applications for new unemployment benefits, with 327,000 new filings, up from 309,000 the week before. Some of those filings are probably related to the fall in homebuilding activity. Construction Spending of all types fell by 0.3% in September, but spending for residential projects fell by 1.1% and has now been posting negative numbers for six months.
There's nothing economically wrong with a strong employment base, provided there are at least some offsets for higher wage and benefit costs. Provided worker productivity is rising, workers can be paid more in wages and benefits without businesses needing to raise prices of goods and services in order to afford them. That said, all-important productivity growth vanished in the third quarter of 2006, where no gain was reported; forecasts hoped for an increase in productivity to 1.3% for the period. The cost of labor per unit produced rose by 3.8% for the quarter, somewhat above the hoped-for level. Less productive workers and rising labor costs are not what the Fed has been hoping to see as they work to contain not only inflation today, but expectations of inflation in the near and not-so-near future. It is because labor costs remain an issue that additional rate increases by the Fed cannot yet be ruled out.
Wage growth helped to move Personal Income growth higher by 0.5% in September, up from August's 0.4% lift. Spending, though, rose by just 0.1% for the month, and the combination of the two helped move the nation's savings rate to -0.2% -- the closest to zero it has been all year. The inflation component of the report revealed a 'core' Personal Consumption Expenditure (PCE) index of 2.4% for the month, still above the range believed to be the Fed's preferred mark.
Having a job amid falling gasoline costs is a recipe for a sunny mood, and according to the weekly ABC News/Washington post survey of Consumer Comfort, consumers are happier than they've been in about three years: the Consumer Comfort index stormed higher to close the week of October 29 at -3. That expansive happiness didn't seem to infect those surveyed by the Conference Board during October, as their reading of Consumer Confidence mostly held steady, sporting a reading of 105.4, about the same as September.
Businesswise, while the ISM manufacturing survey was weaker, the ISM series which follows service-related industries noted a pickup in activity, with the ISM services index climbing to 57.1 in October from 52.9 in September. September's reading was a pretty substantial plummet from August, and the October number recovered all of that decline. As with the manufacturing series, input prices reflected here were on the downside, as well.
It's not unusual for bond and stock markets to get caught leaning the wrong way, but this week was a little unusual. Yields finished the week just a little above where they began, but it's a reasonable expectation that investors are at least a little chagrined for the moment. Hard bets that the economy is heading to free fall keep being dashed, and wagers on a more-docile Fed seem likely to suffer the same fate for at least a while longer. The period of slow growth necessary to fully overwhelm inflation pressures which took several years to build has been with us for only perhaps a quarter, and we are likely to see several more with weak growth but still-tough inflation ahead. Until that weak growth serves to trim payrolls back to produce some human "resource slack" the Fed does remain "in play" to increase rates.
Not next week, though. It's election week, when all manner of confusing messages about the economy will be blathered forth. Next week's a considerably quieter week in terms of new data, but like the ISM service numbers above, will probably see mortgage rates take back all of this week's decline, so we'll probably end up back near 6.5% as a result.
Get out and vote!
Quarter Disorder
Fixed mortgage interest rates barely budged this week as the average 30-year fixed-rate mortgage (FRM) increased by two basis points to close the nation's leading survey of mortgage prices at 6.50%. Five-one Hybrid ARMs also moved up by two basis points, finishing the week at 6.29%.
As expected, the Federal Reserve left interest rates untouched at the close of Wednesday's meeting of the Open Market Committee. The Federal Funds and Discount Rates remained unchanged for the third consecutive meeting, and -- provided the economy holds near present levels -- the Fed may be done moving interest rates for 2006. While the vote to hold rates steady found a majority, there was again a lone dissent among the voting Fed governors. Although the statement which accompanies the end of the affair can reveal some of the Fed's thoughts, this particular memo didn't shed any new light, but did have a notable omission or two.
Concerns about inflation pressures related to energy and commodities prices were absent, but the Fed reiterated that "high levels of resource utilization" could still contribute to price pressures going forward. This presumably refers to the high levels of employment the economy is enjoying at the moment, and the potential for a rise in wage pressures.
New to the October statement was an outlook for growth. While "economic growth has slowed over the course of the year," said the Fed, "going forward, the economy seems likely to expand at a moderate pace." Previous statements about the economy lacked a forecast, so perhaps the Fed is trying to keep the market from expecting a sharper slowdown which could presage a Fed aggressively cutting rates sometime soon. That doesn't appear to be likely at the moment.
Economic growth is notably slower, too. The "advance" estimate for Gross Domestic Product in the third quarter of 2006 came in at a paltry 1.6%, well below forecasts and a fair drop from the second quarter's moderate 2.6% clip. It appears that the hard slump in homebuilding and related activity trimmed about a full percentage point from the growth tally, but there has been at least some pickup in activity in the early fourth quarter. New Home Sales were 5.3% higher in September than in August, ringing in at 1.075 million annualized units sold, and inventory levels of unsold homes continue to move lower. There are only 6.4 months of inventory available at the present sales pace, down from 7.2 months in July and 6.8 in August. Those homes were moved at a discount, though, as selling prices declined by 8% in September when compared to August, and now stand about 10% below year-ago levels. While the housing rout is probably far from over, small steps in the right direction are encouraging.
Also contained in the GDP report were reflections of inflation for the period. The slower growth and decline in energy costs over the July-September period is starting to have a beneficial effect on price pressures. While there are several measures of prices found in the report, the Fed's favorite is thought to be the 'core' Personal Consumption Expenditures (PCE) index, which edged down to 2.3% during the quarter from 2.7% in the second. 'Core' typically reveals costs exclusive of energy, food and volatile components and is thought to be more indicative of the true level of inflation. Regardless of the measure, though, inflation seems to be easing toward the Fed's comfort zone.
While new homes can be priced to move, existing homes suffer from different market conditions. Unlike new homes, it's harder for a homeowner to cut prices since the underlying mortgage and sales costs must be paid, and adding in premiums and such is more challenging and expensive for a potential home seller. Because prices are more intractable, existing home sales continue to slow, slipping by 1.9% during September and landing at a 6.19 million annualized rate of sale. Prices have only fallen about 2% below year-ago levels, and there was actually a slight uptick from August to September. Inventory levels here remain plentiful, too, with 7.3 months of stock available at present sales levels, the same as seen in each of the last four months.
Economically, this week's news paints a mixed picture. Local manufacturing surveys conducted by the Kansas City and Richmond Federal Reserve Banks in their respective districts were a bit at odds. The Richmond Fed noted a distinct softening of activity in their region, with their gauge falling to a reading of -2 in October from a +9 in September. In Kansas City, though, a minor uptick in business was seen, and their indicator rose to +9 in October from +6 in September.
Manufacturing in at least some districts should have kicked higher, as orders for Durable Goods -- items intended to last three years or longer -- jumped by 7.8% during September, largely due to orders for planes and other transportation-related items. Excluding those, there was just a 0.1% lift on spending on durable goods, with most of that boost coming from business investment.
A bigger survey of economic activity conducted by the Chicago Federal Reserve which reveals national trends in growth pointed to slower growth for the third consecutive month. The National Activity Index decreased to -0.51 in September and suggests that the economy grew more slowly than its 'potential' during the month, and posits that the trend for growth is a bit on the weak side at the moment.
The Fed's mention of "high levels of resource utilization" has been reflected in the trends for weekly jobless claims. While hiring has been in a muted pattern for months as the economy has held near what is considered to be "full employment", layoffs have been steady as well. During the week ending October 21, 308,000 new applications for unemployment insurance benefits were filed, still wobbling within a well-defined range which began in late spring/early summer. The employment report covering October is due out next Friday, but if the level of "help wanted" advertising found by the Conference Board is any indication, muted levels of hiring and a steady unemployment rate are the most likely outcome.
Along with steady employment, a rising stock market and falling oil and gasoline costs continue to put a smile on consumer faces. The University of Michigan survey of Consumer Sentiment rose a stout 8.2 points in October, rising to a pre-hurricane Katrina level of 93.6 for the month. On a higher-frequency note, the weekly ABC News/Washington Post poll of Consumer Comfort held at a year's high of -7 during the week of October 22. However, a topping of the stock market and steadying gas prices suggest that optimism may have peaked for the moment.
The steady Fed and slower growth had a reasonable effect on bond markets this week, as market interest rates largely declined. Mortgage rates will follow, as yields have moved a sufficient amount as to drag rates down with them. The 10-year Treasury yield (a fair proxy for fixed-rate mortgages) declined better than an eighth-percentage point between Tuesday and Friday, so rates should head lower as we turn into next week. There are a few indicators aside from the employment report which could spook investors from Halloween though week's end: The Employment Cost Index may show spiking wages, productivity and per-unit labor costs may have turned in a poor showing during the last month, manufacturing or service business may be beginning to kick higher. If the economy really is picking up after the third quarter's 1.6%, now's the time it will start to show.
Mortgage rates should be a bit lower next week, but at least some uncertainty related to the above keeps it a modest move downward of a handful of basis points, at best. It's too soon for even weak numbers to tilt the Fed's hand in favor of an easing, so the downside remains limited.
As expected, the Federal Reserve left interest rates untouched at the close of Wednesday's meeting of the Open Market Committee. The Federal Funds and Discount Rates remained unchanged for the third consecutive meeting, and -- provided the economy holds near present levels -- the Fed may be done moving interest rates for 2006. While the vote to hold rates steady found a majority, there was again a lone dissent among the voting Fed governors. Although the statement which accompanies the end of the affair can reveal some of the Fed's thoughts, this particular memo didn't shed any new light, but did have a notable omission or two.
Concerns about inflation pressures related to energy and commodities prices were absent, but the Fed reiterated that "high levels of resource utilization" could still contribute to price pressures going forward. This presumably refers to the high levels of employment the economy is enjoying at the moment, and the potential for a rise in wage pressures.
New to the October statement was an outlook for growth. While "economic growth has slowed over the course of the year," said the Fed, "going forward, the economy seems likely to expand at a moderate pace." Previous statements about the economy lacked a forecast, so perhaps the Fed is trying to keep the market from expecting a sharper slowdown which could presage a Fed aggressively cutting rates sometime soon. That doesn't appear to be likely at the moment.
Economic growth is notably slower, too. The "advance" estimate for Gross Domestic Product in the third quarter of 2006 came in at a paltry 1.6%, well below forecasts and a fair drop from the second quarter's moderate 2.6% clip. It appears that the hard slump in homebuilding and related activity trimmed about a full percentage point from the growth tally, but there has been at least some pickup in activity in the early fourth quarter. New Home Sales were 5.3% higher in September than in August, ringing in at 1.075 million annualized units sold, and inventory levels of unsold homes continue to move lower. There are only 6.4 months of inventory available at the present sales pace, down from 7.2 months in July and 6.8 in August. Those homes were moved at a discount, though, as selling prices declined by 8% in September when compared to August, and now stand about 10% below year-ago levels. While the housing rout is probably far from over, small steps in the right direction are encouraging.
Also contained in the GDP report were reflections of inflation for the period. The slower growth and decline in energy costs over the July-September period is starting to have a beneficial effect on price pressures. While there are several measures of prices found in the report, the Fed's favorite is thought to be the 'core' Personal Consumption Expenditures (PCE) index, which edged down to 2.3% during the quarter from 2.7% in the second. 'Core' typically reveals costs exclusive of energy, food and volatile components and is thought to be more indicative of the true level of inflation. Regardless of the measure, though, inflation seems to be easing toward the Fed's comfort zone.
While new homes can be priced to move, existing homes suffer from different market conditions. Unlike new homes, it's harder for a homeowner to cut prices since the underlying mortgage and sales costs must be paid, and adding in premiums and such is more challenging and expensive for a potential home seller. Because prices are more intractable, existing home sales continue to slow, slipping by 1.9% during September and landing at a 6.19 million annualized rate of sale. Prices have only fallen about 2% below year-ago levels, and there was actually a slight uptick from August to September. Inventory levels here remain plentiful, too, with 7.3 months of stock available at present sales levels, the same as seen in each of the last four months.
Economically, this week's news paints a mixed picture. Local manufacturing surveys conducted by the Kansas City and Richmond Federal Reserve Banks in their respective districts were a bit at odds. The Richmond Fed noted a distinct softening of activity in their region, with their gauge falling to a reading of -2 in October from a +9 in September. In Kansas City, though, a minor uptick in business was seen, and their indicator rose to +9 in October from +6 in September.
Manufacturing in at least some districts should have kicked higher, as orders for Durable Goods -- items intended to last three years or longer -- jumped by 7.8% during September, largely due to orders for planes and other transportation-related items. Excluding those, there was just a 0.1% lift on spending on durable goods, with most of that boost coming from business investment.
A bigger survey of economic activity conducted by the Chicago Federal Reserve which reveals national trends in growth pointed to slower growth for the third consecutive month. The National Activity Index decreased to -0.51 in September and suggests that the economy grew more slowly than its 'potential' during the month, and posits that the trend for growth is a bit on the weak side at the moment.
The Fed's mention of "high levels of resource utilization" has been reflected in the trends for weekly jobless claims. While hiring has been in a muted pattern for months as the economy has held near what is considered to be "full employment", layoffs have been steady as well. During the week ending October 21, 308,000 new applications for unemployment insurance benefits were filed, still wobbling within a well-defined range which began in late spring/early summer. The employment report covering October is due out next Friday, but if the level of "help wanted" advertising found by the Conference Board is any indication, muted levels of hiring and a steady unemployment rate are the most likely outcome.
Along with steady employment, a rising stock market and falling oil and gasoline costs continue to put a smile on consumer faces. The University of Michigan survey of Consumer Sentiment rose a stout 8.2 points in October, rising to a pre-hurricane Katrina level of 93.6 for the month. On a higher-frequency note, the weekly ABC News/Washington Post poll of Consumer Comfort held at a year's high of -7 during the week of October 22. However, a topping of the stock market and steadying gas prices suggest that optimism may have peaked for the moment.
The steady Fed and slower growth had a reasonable effect on bond markets this week, as market interest rates largely declined. Mortgage rates will follow, as yields have moved a sufficient amount as to drag rates down with them. The 10-year Treasury yield (a fair proxy for fixed-rate mortgages) declined better than an eighth-percentage point between Tuesday and Friday, so rates should head lower as we turn into next week. There are a few indicators aside from the employment report which could spook investors from Halloween though week's end: The Employment Cost Index may show spiking wages, productivity and per-unit labor costs may have turned in a poor showing during the last month, manufacturing or service business may be beginning to kick higher. If the economy really is picking up after the third quarter's 1.6%, now's the time it will start to show.
Mortgage rates should be a bit lower next week, but at least some uncertainty related to the above keeps it a modest move downward of a handful of basis points, at best. It's too soon for even weak numbers to tilt the Fed's hand in favor of an easing, so the downside remains limited.
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