Economic Highlights for the Week Ending April 13, 2007

Monday, April 9th
The economy created 180,000 new jobs in March according to Labor market data released last Friday. The stronger than expected gain last month followed upward revisions in the prior two months for a net job gain of 32,000. Average hourly earnings increase 0.3% on a monthly basis and are up 4.0% over the past year. The unemployment rate dropped to 4.4% from 4.5% in February. Such low joblessness could result in upward wage pressures going forward.
Tuesday, April 10th
Money magazine reported that option ARMs, no-doc and other exotic loans still have a market despite the recent subprime sector drubbing. Brokers are still finding banks willing to lend to borrowers with average credit scores who want riskier mortgages. Nearly 40% of loans made in 2006 fell into the subprime or Alt-A category.
Wednesday, April 11th
The FOMC minutes from the March 20/21 meeting provided more detail on the Fed's economic and interest rate outlook and policy stance. The Fed said that inflation remained uncomfortably high with risks biased to the upside while downside risks to growth remained because of sluggish business investment. Policymakers changed the policy statement language so as to increase policy response flexibility because of increased risks to both inflation and growth. However; in the minutes they indicated that rate increases may prove necessary.
The National Association of Realtors projects that existing home sales will fall 2.2% in 2007 to 6.34 million while new home sales will drop 14.2% to 904,000. Previous forecasts called for a 0.9% decline in existing home sales and a 10.4% decline in new home sales. Slower sales will weigh on appreciation rates. The median existing home sales prices is expected to decline 0.7% this year to $220,300 while median new home prices are expected to increase 0.4% to $246,200.
The MBA mortgage applications index fell 0.4% to 646.6% for the week that ended April 6. In a hopeful sign for the spring selling season, purchase applications increased 2.7% during the week. The refinance index tumbled 4.0% last week under higher mortgage interest rates.
Thursday, April 12th
Import prices jumped 1.7% in March due to a 9.0% surge in petroleum prices. Excluding petroleum, import prices rose just 0.3%. Over the past year import prices have increased 2.8% while petroleum prices increased 2.4%. Outside of the energy complex, imported goods inflation remains moderate.
Chain store sales surged 5.9% in March from March one year ago according to the International Council of Shopping Centers. Most retail segments posted strong results with the exception of furniture store sales which fell 13.5%. An early Easter shifted holiday sales to March; consequently, sales are expected tumble in April. Jobless claims increased 19k to 342k for the week that ended April 7.
The outsized gain last week was related to seasonal effects of the Easter holiday. Looking ahead, volatility in claims is expected to continue amid increased construction job layoffs and slower economic conditions.
Lenders raised mortgage rates last week as yields in the bond market moved higher on data showing stronger than expected payroll gains in March. 30-year fixed rate mortgages averaged 6.22% this week compared to 6.17% last week according to Freddie Mac's mortgage market survey.
Friday, April 13th
The producer price index shot up 1.0% in March led by higher food and energy costs. Food prices increased 1.4% while energy costs jumped 3.6% over the last month. Overall producer prices have increased 3.1% over the past year. Excluding food and energy prices from the index, the core PPI was unchanged in March and rose a mild 1.6% over the past year.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12612.13 12560.20 +51.93 or +0.41%
NASDAQ 2491.94 2471.34 +20.60 or +0.83%