Tuesday, December 16, 2014

Oil price free fall and market turmoil

The state of oil markets are in a tricky place right now - after several years of steady price increases, the strength of gas economics may finally be losing its oily sheen. With the United States catching up to Saudi Arabian and Russian oil powerhouses in terms of production, global supply is finally surpassing demand in such force that gas prices have been in a free fall over the past several weeks.

The effect of this shift has both positive and negative consequences: For American consumers, money saved filling the gas tank means more flexible cash to pump into the economy, boding well for a strong holiday season.

On the other hand, a surge in the oil & gas "fracking" industry in recent years has created thousands of jobs mostly in Colorado, Wyoming and North Dakota. If prices continue dropping too precipitously, demand for these jobs could also go away.

As of Tuesday this week, crude oil prices finally stabilized after an extended dropoff, also lifting up oil & gas stocks.

An additional point of concern is the state of Russia's economy, affected by lower gas prices and other political problems. More broadly, Russia figures to be a huge player in the European economic balance, so financial woes for Russia also mean potential financial woes for all of Europe.

With all of these changes in mind, it will be telling after the holidays how the U.S. economy holds up in light of oil prices and the global marketplace. Stay tuned to our blog for updates.

Friday, December 5, 2014

Latest report: Job growth booming

November job reports data rolled in Friday brimming with positive data: More than 321,000 new employees were added to U.S. payrolls, about 100,000 more than expected. Some industries expected this growth due to seasonal work - i.e. retail, leisure and hospitality - however, large gains were also noted in high-wage positions including financial, engineering and computer design fields.

According to one metric, which measures how much employers are expanding or shrinking their payrolls, November was the strongest month of improvement since 1998. The last two months of job gains have far exceeded predictions, suggesting that the economy is on a fast track to recovery.

How does jobs data affect mortgage rates?

The only potential downside to all of this growth: Some worry it will cause Fed officials to start raising central interest rates at least by mid-2015 to stave off excessive inflation. This means that the ultra-low mortgage rates we've enjoyed over the past few months could be gone in a flash, depending on how the Fed interprets various economic indicators.

A minor caveat to all of the rosy data was a slight lag in consumer credit spending, dropping from $15.4 billion in September to $13.2 billion the following month, likely indicating that Americans were monitoring their spending habits before the holiday season. However, wage growth also picked up 0.4% in November - much more of which will be needed before interest rates start to rise.