It was reported this morning that another 3.84 million Americans filed for unemployment benefits this past week, exceeding the projection of 3.5 million. This is a nice drop from the 5.6 million claims the week prior; a move in the right direction. With many states now bringing workers back into the office, it will be interesting to see what happens over the next few weeks. Many workers are starting to publicly shame companies for bringing them back too soon, with some employees refusing to show up to work. In cases of lower income positions, after adding the additional $600 from the Federal Government, workers are earning as much or more on unemployment than they would by working. Some of the people in this group would rather delay returning to work. Overall, it seems clear that reopening the country for business is not going to be an easy transition for many employers.
We also received an estimate of consumer inflation via the Fed’s favorite gauge, the Personal Consumptions Expenditures rate (PCE). The headline PCE number showed a decrease of 2.0%, which was far more of a drop than the anticipated 1.1% loss. The year-over-year number reduced by .5%, taking the annualized number to just 1.3%. This low level of inflation gives the Fed permission to continue to print money to fund the significant bond purchase programs they are currently running. It is important to note that two of the greatest risks to our economy are deflation and inflation. Currently, inflation is not a problem and deflation is one of the greatest threats to continued economic growth.
With the Fed tightly controlling mortgage bond prices, we will maintain a locking bias.