Federal Reserve Pumps The Brakes – Market Update – ZING Blog by Quicken Loans

As with everything right now, it seems like it’s all about the ups and downs. On the bright side (fingers crossed), there could be some big news by the end of the day on getting baseball going and a little bit of summer normalcy. On the other hand, the unemployment rate is still high and the Federal Reserve says we’ve got a ways to go yet.

I hope everyone had a good weekend. Let’s get to it!

Headline News

Some of the economic analysis used in this report was provided by Econoday.¹ Let’s run through it!

MBA Mortgage Applications

Mortgage applications were up 9.3% overall with a strong increase in refinance applications, which was up 11%. Meanwhile, applications to purchase homes were up 5% for the week and have now gone up 13% compared to the same time a year ago.

In this survey, the average rate for a 30-year conventional fixed mortgage was up a single basis point to 3.38% last week.

Consumer Price Index (CPI)

The CPI is one measure of inflation in the economy. As we talked about in the past, it’s a good thing if prices go up a little bit because it encourages people to spend their money now which keeps the broader economy going. However, it’s not looking too great right now.

Prices on the consumer side fell 0.1% in May, and that number was matched even when food and energy were taken out, so it can’t be completely blamed on low oil prices, although energy costs were down 1.8% for the month. The price of car insurance has gone down quite a bit as well. With many companies still having the majority of their workforce work from home, people aren’t driving as often. At least in theory, this means less accidents, and insurance companies have been pricing accordingly, with the cost of auto insurance down 8.9% after falling 7.2% in April. The cost of airfare was also down 4.9%.

The cost of shelter was up 0.2% for the month. The cost of rent and homeownership were both up 0.3%, but this was slightly upset by the fact that the cost of staying away from home went down 1.5%. The cost of food is up 0.7% overall and the expenses for eating at home were up 1%, largely thought to be because people are eating out less. Also, there may be some truth to talk of a run on meat as beef prices were up 10.8%. Finally, the cost of medical care was up 0.6% for the month after being up 0.5% each of the prior 2 months.

Overall inflation was up just 0.1% since last May, and up only 1.2% in core categories (excluding food and energy).

Jobless Claims

Initial jobless claims were down 355,000, still elevated at 1.542 million last week. Meanwhile, the 4-week moving average was down 286,250 to come in at 2.002 million.

On the continuing claims side, these were down 339,000 to settle at 20.929 million. Among those who qualify for unemployment insurance, this rate was down 0.2% to 14.4% of the workforce. This number isn’t falling as fast as might be hoped. On the continuing claims side, these were down 404,750 to come in at about 22.988 million.

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