Morning Report – Partially improving labor market 8/18/14

Posted on August 18, 2014 by Brent Nyitray

Markets are higher as European stocks rally. Bonds and MBS are down on decreasing pressure in Ukraine.

The National Association of Homebuilders Sentiment Index rose to 55, the highest level in seven months.

This week will have some important data, with housing starts and building permits tomorrow, and the FOMC minutes on Wednesday. The minutes will be especially interesting as “lift off” (the Fed’s euphemism for increasing rates) approaches. Finally, central bankers, finance ministers, and other officials will meet at Jackson Hole on Thursday. There will be the possibility of market moving quotes so be aware.

The labor market is improving, at least at the higher end. Skilled labor is tough to find, and we are finally seeing some job growth in professional services. Low skilled labor and the long term unemployed are still struggling. Separately, part time workers who want to work full time are presenting a problem for the Fed. Which means don’t focus on the unemployment rate, focus on wage growth when thinking about the Fed’s posture towards interest rates.

What has QM succeeded at doing? Raising compliance costs. Has it changed business practices? Nope.

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