Greek Troubles Overshadow Strong Data

Despite stronger than expected economic data, the financial situation in Greece held the greatest influence on mortgage rates this week. A flight to quality and prospects of slower economic growth in Europe were favorable for mortgage markets and negative for the stock market, and mortgage rates ended the week lower.

Global financial markets remained focused on the economic troubles of Greece. Greek workers responded to proposed austerity measures with strikes and riots, and investors grew increasingly concerned that other smaller European countries will face similar problems cutting their budget deficits. As a result, US mortgage markets were helped in two primary ways. First, in response to the uncertainty in Europe, investors shifted funds to safer investments, including US Treasuries and mortgage-backed securities (MBS). Second, investors expect that continued economic turmoil in Europe will reduce US exports to the region, slowing US economic growth and reducing inflationary pressures. Increased demand for MBS and lower future inflation are both positive for mortgage markets.

The April Employment report exceeded expectations in nearly every area. Against a consensus forecast of 190K, the economy added 290K jobs in April, the most since March 2006, and the data from prior months was revised higher by an additional 121K. The April figures include 66K temporary census employees hired by the government, but this was fewer than expected. The manufacturing sector added the most jobs since 1998. The Unemployment Rate rose to 9.9% from 9.7%, but that was due to unexpectedly large growth in the labor force as more people began to seek jobs.

Positive Hawaii Real Estate Market Opens Financing Options

Successive upward volume and a stabilization of home prices in Hawaii is allowing lenders to once again become daring with their offers. When just a year ago the only way you could purchase a home with little down was a VA, FHA, or a Rural Housing Loan, now lenders are allowing 95% financing with 5% down.

This is a major shift for many lenders, and a positive move to help potential home buyers. Although these loans do carry high mortgage insurance premiums, it does give the buyer more options that the three federal programs listed above. Another benefit over VA, FHA, and Rural Housing loans is that each of these programs have an upfront fee. An FHA loan for example will cost the borrower 2.25% of the loan amount for the FHA guarantee. The VA charges 2.15% and the USDA charges 2% for the RHS loan program.

The trade off of lower MI payments versus an upfront fee of several thousand dollars is one you should calculate with a mortgage professional.

Great Rates on Shorter Term Loans

If you have not considered a 20-Year, 15-Year,or 10-Year Fixed loan, now might be the time. Look at the rate table below. The rates for these loans are at levels never seen before.

Also Notable:

March Pending Home Sales increased 5.3% from February
The ISM manufacturing index rose to the highest level since June 2004
As expected, the European Central Bank (ECB) made no change in rates
Oil prices declined more than $10 per barrel to $75 per barrel
 

Average 30 yr fixed rate:

Last week:
-0.05%


This week:
-0.15%

 

Stocks (weekly):

Dow:
10,400
-700

NASDAQ:
2,300
-200
 

Week Ahead

The most significant economic data next week will be Friday's Retail Sales report. Retail Sales account for about 70% of economic activity. Industrial Production, another important indicator of economic activity, will be released on Friday as well. Import Prices, the Trade Balance, and Consumer Sentiment will round out a light week. There will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Worker Shortage Coming as Population Ages
By Ruth Mantell

RISMEDIA, May 10, 2010—(MCT)—With millions of unemployed people across the country struggling to find work, it may seem unbelievable that there could be more jobs than workers to fill them in coming years, but a new report predicts exactly that.

A worker shortage could develop within 10 years as baby boomers reach traditional retirement age and there are too few replacement workers, according to the report published Monday by the MetLife Foundation and San Francisco-based Civic Ventures, a think tank focusing on baby boomers, work and social purpose.

"When the nation comes out of the current jobs recession — and this may take two to three years — we will begin to see spot shortages in labor markets," according to the report. "If the economy continues to improve, the spot shortages will become more general, and we will experience the shortages our research projects."

How did the report's authors arrive at this conclusion? First, government analysts expect 14.6 million new nonfarm payroll jobs will be created between 2008 and 2018. Including self-employed workers, family members working in family businesses and workers in farming the total hits 15.3 million new jobs.

Next, given the government's projected population growth and current labor force participation rates — and assuming no major changes in immigration — there will be about 9.1 million additional workers over the same time period. Taking into account multiple job holders, the total number of jobs expected to be filled is 9.6 million.

Finally, subtracting the projected number of filled jobs from the expected number of new jobs results in a range of 5 million to 5.7 million vacant jobs. However, using projected labor force participation rates — baby boomers are not expected to retire at as high a rate as earlier cohorts of older workers — there would be 3.3 million to 4 million vacant jobs, according to the report.

"While things look very dark at this moment in terms of the employment situation, unless this is an unbelievably unusual recession we will come out of it, and when we come out of it we may find ourselves first experiencing spot shortages in key fields, such as health," said report co-author Barry Bluestone, an economist and founding director of Northeastern University's Kitty and Michael Dukakis Center for Urban and Regional Policy.

"And if we get projected growth, there could be pretty broad shortages, and we need to find a way to fill those jobs," he said.

Older workers may be the answer. "What makes me sanguine about our ability to fill these jobs is that people are not only living longer, but they are much healthier, and as a result it's more likely that we'll want to continue to work, even if we don't have financial reasons."

Still, not everyone agrees with the report's projected job shortage.
Harry Holzer, an economist at Georgetown University and the Urban Institute, said he's skeptical about a projected longer-term worker shortage. A combination of new technology and globalization could constrain job growth, he said.

"I'm willing to acknowledge that you can have shortages for short periods of time. At the occupational level, there are some areas, especially health care, where demand is outstripping supply of workers. But an economywide shortage of workers? I don't think so," Holzer said.

Labor markets adjust — if more workers are needed then wages will increase, Holzer said. He added that part of the adjustment will require workers retiring later, and that such a trend has already started, in part because of better health and more workers in white-collar jobs. Insufficient retirement savings and losses in the stock and housing markets also add to the need to work longer. "All those factors would lead people to delay retirement," Holzer said.

The government projects the following job categories will see the largest employment growth between 2008 and 2018:

—Registered nurses will add 582,000 jobs;
—Home health aides will add 461,000;
—Customer services representatives will add 400,000;
—Food preparation and serving workers (including fast food) will add 394,000;
—Personal and home care aides will add 376,000;
—Retail salespeople will gain 375,000;
—Office clerks, general will gain 359,000;
—Accountants and auditors will gain 279,000;
—Nursing aides, orderlies and attendants will gain 276,000;
—Postsecondary teachers will gain 257,000.

The MetLife/Civic Ventures report specifically picks out growth of 6.9 million new jobs in the "social sector." The report defines "social sector" jobs as those in industries covering health care and social assistance, educational services, nonprofit community and religious organizations, the performing arts, museums, libraries and government. Social sector jobs represent 47 percent of total projected nonfarm payroll employment growth, according to the report.

Older workers may be particularly well suited to many of these jobs, Bluestone said.

"One thing that's true is that many of these jobs do not require enormous physical effort," Bluestone said. "Many of the jobs in the social sector are ones that require less physical exertion, but require people with common sense and experience."

However, younger workers will need open spots, too, said Heather Boushey, senior economist at the Center for American Progress.

"We probably need to do more to make sure folks can retire so that we can increase the availability of jobs for younger workers," Boushey said. "There is a crisis for young people who are graduating and not getting their foot in the door."

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