Last week we asked why rates were so low. The question arises because the economy seems to be humming along quite nicely. Sure, there are headwinds. The latest headwind is the threat of the coronavirus. Not to play down this threat, but in the past several years the economy has withstood plenty of grave threats — from super-hurricanes to Brexit. Through it all the expansion has now raged on for over ten years.
Thus, when we see the jobs report at the end of this week, we will have a better idea of how the economy is faring. Certainly, the coronavirus has not had an effect on our jobs market at this juncture. But because we had a stronger than expected report in for January, any “cushion” the economy generates will help against the negative effects that are down the road. If job growth weakens before we see the reaction to the virus, we will be more vulnerable for the slowdown.
Keep in mind that the economy and job growth did slow down in 2019. The slowdown was not enough to make us believe a recession is around the corner, but it was enough of a slowdown to bring interest rates down to historic lows. Might two very strong jobs reports in a row be enough to reverse this trend? Right now, we think that moderate jobs growth and moderate economic growth are just right for today. And hopefully the latest threat does not cause any more of a slowdown. Stay tuned.
Dave Hershman is the top author in the mortgage industry. Dave has published seven books, as well as hundreds of articles and is the founder of the OriginationPro Marketing System and Mortgage School. Want to send this commentary and other news in a personalized format to your sphere database or on social media? Sign up for a free trial at www.OriginationPro.com.