Economy

Unemployment Rises Less Than Expected

by
unemployment numbers

Ah, the world of finance, where the rules are made up, and the points don’t matter. OK, I stole that from Phineas and Ferb, but sometimes it fits better than it does even for a fake game show. Today, unemployment numbers were released in which the number of Americans filing for unemployment increased. That means more Americans are jobless than before, despite the so-called worker shortage and the Great Resignation. Don’t forget, you don’t get to file for unemployment when you quit, so these are still Americans who were fired, downsized, let go, or their employer closed. More unemployed Americans is bad, in general, but… Economists were predicting (modeling, similar to what meteorologists do) that there would be even more Americans filing for unemployment, so the fact that more Americans are unemployed, but not as bad as we thought, is good news. Kind of. Check out my review of the new fintech investing apps. The reality is that numerous traders and investors made their trades expecting higher unemployment numbers would push down the price of securities and investments. Since they were wrong, the price of those investments are rebounding. This is “good news” in the world of finance, and a …

Read More

Will Fed Raise Rates Sooner Than Expected?

by
fed raise rates

There are several economists out there predicting that rising inflation will push the Federal Reserve to raise interest rates sooner than project. In fact, half of the Fed Board was talking about a rate increase in 2022 instead of the previously telegraphed 2024. But, does that mean The Fed will raise rates sooner than previously stated? Inflation Isn’t Coming All of this is predicated on inflation rising. The concern right now is that prices have been rising this year. This is all true, but this is October and that means the holiday shopping season is upon us, and chances are it won’t look very good come January. We’ve already seen the job reports showing that job growth is slowing despite a supposed worker shortage. Unemployed people spend a lot less at Christmas. But, there is more than that. Employed people who know unemployed people spend less as well due to a fear that they could soon be unemployed as well. Add to that reports that there are going to be supply chain problems, and that container ships have to wait excessive times to get their cargo unloaded by dock workers on the west coast and you end up with a …

Read More

Extra Unemployment Ends

by

Here in Colorado several restaurateurs wrote a letter to Governor Jared Polis earlier this summer asking him to join the other states that ended the extra unemployment benefits enacted in response to the global Covid-19 panic. Their theory was that the higher unemployment checks were keeping restaurant workers on the sidelines making them unable to appropriately staff their restaurants. Extra $300 Unemployment Payment Ends Until earlier this month, many recipients of unemployment were getting an extra $300 per week. This is a substantial amount considering typical unemployment benefits are around $400 per week under normal circumstances. Another way to look at is that the $300 per week represents $7.50 per hour when compared to a full-time 40-hour workweek. The restaurant owners concluded that the ability to earn a total payment of approximately $700 per week, or $17.50 per hour as a 40-hour workweek. With numbers like that, it’s no wonder that hard working restaurant jobs paying near minimum wage of $12, or even $13 or $14 per hour would not entice workers to come back. Supporters of the extended benefits looked at the same data and concluded that it is the restaurateur’s own fault for paying such low wages. Who …

Read More

Federal Reserve Meeting Notes Meaning

by
fed reserve meeting notes

The Federal Reserve meets once a quarter. After that meeting, they announce what, if any changes, they have made to the Fed’s interest rate policy. At the last meeting, there were no changes to the Federal Reserve’s interest rate targets. The Federal Reserve meeting notes refine the details of the main Fed announcement. Fed’s Meeting Notes Later, after they have been reviewed and made viewable for the public, the Fed releases the notes from it’s meeting. Financial analysts and market pundits then parse these notes for clues to the Fed’s thinking. This time, everyone is looking toward how the notes take about bond-buying tapering. What does this mean? The short version is that when the economy went so bad back during the Great Recession following the real estate market crash, the Fed had to do more than just cut interest rates to stabilize the economy. In my opinion, the Fed Chairman Ben Bernake saved the US economy from a hard recession by flooding the market with liquidity and saying that he would keep doing it for as long as it takes. Check out my Acorns review is Acorns Legit? Basically, as long as it takes, has never really come. One …

Read More

New Home Sales and Post Covid Life

by
new home sales housing us

Here is a quick bit of news to inform how you look at investing and personal finance moving into a post-Covid world. New Home Sales Rise New home sales were up 19% annually. That is much more than predicted by analysts. There are few trends pushing the higher home sales and those same trends are worth noting across your investing. Covid knocked down the home buying market to basically zero, as showings were banned. Covid also made people more conservative and protective of their finances. Staying put seemed easier and less risky than trying to move. But… Now, as things move toward a post Covid mindset, buyers are looking for new homes. However, there is a very low supply of existing homes on the market, so one of the easy ways to buy a house is to buy new. That means that what existing homes do go on the market are selling for asking price or higher, and selling quickly because of all the demand. This is good news because that experience will lead others out of their cocoon to sell. This news obviously helps home builders, although that still remains a very risky investment. See Is Zelle Safe on …

Read More

How Is The Economy Doing?

by
congress blame game

When it comes to the U.S. economy there are a lot of opinions. Many of those opinions have motivations behind them that tend to skew their analysis. So, who should you listen to about the economy? Well, you could do a lot worse than the Chairman of the Federal Reserve. The Economy Is Weak The U.S. recovery is weak, very weak. Although jobs are recovering, they are still lower than they were when the pandemic started. The opinion of the Fed Chairman is that the economy needs more help in the form of government stimulus. Of course, the politicians in Washington care more about Dems vs. Repubs than they do about America, so we are caught in petty fights while the economy sputters. Why The Economy Needs Help While politicians, especially the President, love to point to the stock market as proof the economy is doing well, most investors are very skittish right now. Any bad news at all, and they’ll turn into sellers, and take the market with it. Stimulus in the form of extra unemployment benefits has proven particularly helpful to the economy. Why? Because people on unemployment spend that money, and that stimulates the economy. Save money …

Read More

New Home Sales Up During Covid

by
new housing

An interesting wrinkle in the new Covid economy showed up today. The U.S. Department of Commerce reported that new home sales in August rose by 4.8%, on top of a spike 13.9% in July. Buying New Homes Overall home sales are having difficulty in no small part because home buyers are reluctant to do several showings in a day in a Covid world. Those showings are what motivate buyers to purchase existing homes. Unlike existing home sales, new homes are typically sold via model homes. Model home are shiny, bright, and seem cleaner, even though more people may actually move through them each day. Furthermore, rather than having to see numerous homes to find the perfect one, buyers need only find a model they like. Builders then allow buyers to tweak that model. Low Mortgage Rates Record low mortgage rates are also helping drive sales for new construction. Unlike existing home sales that are dependent upon subjective appraisals, lenders can easily get a feel for the current value of the one of many new buildings a particular buyer looks to purchase. Is Zelle a scam? Finding a mortgage, however, even for new construction is getting harder. It turns out lenders …

Read More

Fed Says 0% Interest For Years

by
future tunnel

According to news reports, the Federal Reserve will signal that its interest rate plan will remain unchanged through the end of 2023. These kinds of “leaks” are typically from Fed staffers trying to lessen any shock ahead of the actual Fed meeting. What 0% Interest For Three Years Means For starters, this is both a bold, and a baloney statement. It’s bold in that stating there will be no interest rate hikes for three years, the Fed is making a prediction about the U.S. economy and where it will be going and committing to 0%. It’s baloney, because if things go well coming out of the whole Corona virus thing and the U.S. economy roars ahead in 2021, or 2022, the Fed will just come out with a new statement saying that economic data dictate a new policy direction. So, what is the point of the Fed’s statement? Investors know how to make money. It isn’t about predicting the future, it’s about determining what the risk is and pricing it accordingly against the possible return. This is a lot easier than it sounds. It requires looking at an impossible number of variables, and weighing each one. In the end, the …

Read More

Negative Interest Rates and The Fed

by
negative interest rates

Like any type of news, sensational, click-bait news draws in a lot of clicks for financial websites. Unfortunately, this can lead to a lot of confusion, especially for folks who only read the headlines. I can often tell when this happens because my questions fill up with vaguely understood concepts and concerns about unlikely situations and issues. This is happening more and more with the topic of negative interest rates. Negative Interest Rates What are negative interest rates? Let’s start with what are negative rates. The concept is simple on its face. Interest rates are normally, “positive.” The borrower pays a (positive) interest rate on a loan to the lender. Or, in the case of a savings account, the bank pays a (positive) interest rate to the account holder. In a world of negative interest rates, this would theoretically reverse. The lender would pay the borrower to take out a loan, and the account holder would pay the bank to keep their money. If this sounds bizarre, you are right, and it wouldn’t really happen. — We’ll get to that in a moment. More abstractly, The Federal Reserve Bank pays banks a small amount of interest to hold deposited funds …

Read More