Even before we saw the jobs report, the Federal Reserve decided to step in with an “emergency” rate cut in response to the coronavirus crisis before their next scheduled meeting. Even though we have not seen many negative reports on the economy, the Fed saw what was on the horizon. The only problem is that the markets viewed this as somewhat of a panic move by the Fed — verifying that the worst may be coming. The stock market rallied the day before the news, but fell back after the Fed acted. From there, the recent volatility continued.
Of course, one day of reaction does not mean that the Fed’s move was not on target. We do know that if a coronavirus slowdown hits, the Fed will have less ammunition to fight with, as their short-term rates are pretty close to zero. With regard to the jobs report, the economy still seems strong to us. The increase of 273,000 jobs in February was above expectations. There was also a revision upward of January’s strong report — to the tune of almost 50,000 jobs. Together the report was seen as much stronger than expected. The headline unemployment number rose to 3.6%, still near a historic low. Wage increases were at 3.0% annually, meaning that inflation remains under control.
The next report that is released will not be considered a “pre-virus” report, though certainly the full effect of the virus may not be seen for some time within our economy. We obviously receive a lot of goods from China and the shortages which are cropping up will likely have some impact. Certainly, the travel industry will be affected as well. How much, we are not sure. We can say that our lower interest rates will counter with some positive stimulus in the short run, especially within the real estate markets and with regard to refinances.
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.