My Mortgage Blog

Last week brought a lot of new economic information. Raw data is always spun by analysis, sometimes for reasons of advantage in driving clients to buy or sell things,
sometimes to further theories, and often for politics, Lord knows.
     
But this time is exceptional, cubed. Global economies have never been in situations like these, and thus neither have central bankers, economist/analysts; and reporters cannot tell when sources are spinning, straight, or bent. I vacillate between the anger of a citizen done wrong by political leadership, exasperation with dumbed-down media, and homicidal rage at the amorality of colleagues in markets, utterly dependent on market health but undermining them for the slightest advantage.
     
Today… compassion, even for those unfortunate branches of humanity.
     
The biggest news: 227,000 net-jobs created in February, and a 61,000 positive revision to the Dec-Jan sum. That's good news, and crowing by the party in power is justfied. However, all is relative. The good jobs numbers in the last three months are likely to have been boosted by good weather. The February numbers include a negilgible gain in wages, 0.1% equal to three cents per hour, and no acceleration in hours worked. Unemployment remained 8.3%, and inclusive of "involuntary part-time" improved slightly to 14.9% -- both understated by discouraged workers leaving the workforce. You ain't unemployed if you ain't lookin'.
     
Nothing matters more than jobs, because we must have tax revenue before we embark on austerity, and austerity is coming, ready or not.
     
The ISM reported sustained growth in the service sector, to 57.3 in February from 56.0 (a 50 level is breakeven, 60 is pink-of-health). Econo-political discourse is now polluted by advocacy for manufacturing jobs. Do I hope my 17-year-old son will stand in a production line, competing head-to-head with Asian sweatshops and superbly conceived German mini-lines? Or a career in what Peter Drucker described 50 years ago as "knowledge work," perhaps at Google, or programming manufacturing robots, or any number of ventures in which his brain might be paid better than his hands?
     
My friend, who writes Calculatedriskblog says, "…Housing has made its bottom turn." No it has not -- not with prices still falling and distressed inventory unchanged.
     
Loud hozannahs greeted the Fed's report of an 8.6% surge in consumer credit: banks are easing, consumers in action! No. Just… not. Credit card debt actually contracted at a 4.4% pace, knocking balances back to November levels. Non-revolving credit roared ahead at a 14.7% pace. Partly good: auto loans -- credit is easier (cars are easier to repossess than houses), and the damned things do wear out, and high-mileage new beats the old gas-blazer.
     
Partly awful: the fastest growth in credit is student loans, now nearly equal to the nation's total outstanding 2nd mortgages and Helocs, loaded onto the backs of kids to pay the higer-ed racketeers. In this whole Great Recession, the only sectors of the economy to raise prices at a multiple of inflation: the health-care Corleones, and higher ed. A shameful and destructive reversal of GI Bill wisdom.
     
Overseas: officials say the new Greek deal marks the end of European crisis. Uh-huh. New Greek bond yields already predict certain default. Banks propped, the Euro-story is now the actual economies. Spain: unemployment 22% and rising, 45% among youth; budget out of balance 8.3% of GDP. German-forced austerity the plan. For now.
     
Back here, bizarre bad-good-bad-good news. In a panic, the Administration and silent, bi-partisan co-dependents in Congress have jacked FHA fees to fill a loss hole which will require bailout after the election. The jack is so high, driving new applicants away, that FHA net revenue may fall instead. The good news: nouveau private mortgage insurers can fill most of the credit gap. The bad news: the highest-quality applicants will bolt FHA, leaving it with net-increased risk and losses.
     
Election year. Nothing to do but watch the data stream by. The best view: unfiltered original sources. Take gin straight in a Martini. Don’t monkey with it.