Weekly Economic Review | July 25, 2022

The Labor Department reported that initial jobless claims climbed last week to their highest level since November 13, 2021.The gain signals that labor market conditions may be cooling, although they are still at a healthy level. In recent weeks, tech companies including giants like Alphabet Inc.s Google, Apple Inc., Meta Platforms Inc. and Microsoft Corp have said they will slow hiring due to global uncertainty. Claims in regular state programs increased 7,000 to 251,000 for the week ending July 16^th, after reporting 244,000 initial claims the prior week. The increases in claims this week was heavily concentrated in Massachusetts with a gain of 14,100. The four-week moving average climbed to 240,500 from 236,000 the prior week. The total number of people continuing to receive regular ongoing state benefits, a report which is lagged one week, increased 51,000 to 1.384 million for the week ending July 9^th.

The National Association of Home Builders/Wells Fargo reported housing sentiment dropped to its lowest level since April of 2020. Builders are getting more pessimistic as the cost to build a house meet the limits of housing affordability. The cost of financing, construction and the land continues to escalate, amid challenges with supply bottlenecks and high inflation. The index of builder sentiment fell to 55 in July from 67 last month, the seventh straight decline.

The Commerce Department reported that housing starts continued to decline in June, falling to its lowest level since September. The drop was driven by a decline in single-family homebuilding. A sharp rise in mortgage rates has pushed home affordability out of reach of many and slowed demand. Housing starts fell 2.0% in June to a 1,559,000 annualized rate following April’s 1,591,000 pace. Single-family starts retreated 8.1% in June with multi-family starts increasing 10.3%. Building permits, a gauge of future construction, fell 0.6% in June to a 1,685,000 pace.

The National Association of Realtors reported that existing home sales fell in June for the fifth straight month to its slowest pace since June of 2020. The combination of sharply higher mortgage rates and higher home prices in such a short time period is turning back potential homebuyers. Contract closing, which usually occur a month or two after a contract is signed decreased 5.4% in June to a 5.12 million pace after dropping 3.4% in May. The median selling price increased to $416,000 from $408,400 in May.

The Conference Board reported the index of leading economic indicators declined 0.8% in June, the fourth straight drop. The loss was led by a decline in consumer expectations, a drop in the average workweek, jobless claims, stock prices falling and a drop in ISM New Orders. The index of U.S. leading indicators is a gauge of the economic outlook for the next three to six months. The coincident index, a gauge of current economic activity, climbed 0.2% in June after gaining 0.2% in May.

The Mortgage Bankers Association reported the MBA index of mortgage applications fell last week for the third consecutive week and to its lowest level since February of 2020. The index decreased 6.3% for the week ending July 15^th, after dropping 1.7% the previous week. Refinancing applications decreased 4.3% to 655.7 from 685.3 the prior week. Home purchase mortgage applications decreased 7.3% to 208.0. Refinancing made up 31.4% of applications with an average loan size of $276,500, while purchases average loan size was $406,600. The average contract rate on a 30-year fixed-rate mortgage climbed to 5.82% from 5.74% last week.

BOND MARKET REVIEW

Friday’s yields for the 2-, 5-, 10- & 30-year Treasury benchmarks securities were 2.97%, 2.84%, 2.75% and 2.95%. The 2yr/5yr, 5yr/10yr, 10yr/30yr and 2yr/30yr spreads closed at -13, -9, 20, and -2 basis points respectively.

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