Wednesday, December 14, 2016

Fed raises interest rates for first time in a year

This chart shows the change in unemployment rate compared with the number of monthly jobs added 
from 2009 through early 2016. The current unemployment rate has dropped to about 4.6%.
By Ben Moore - Own work, CC BY-SA 3.0,

The Federal Reserve's open market committee began its much anticipated December meeting Wednesday with some much anticipated news: Yes, committee members unanimously voted to raise the central bank's interest rate by 0.25 percent. This matches the increase made at last December's meeting, which was the benchmark interest rate's first increase in nearly a decade.

Since the election of Donald J. Trump as the U.S. president-elect in November, the stock markets have been rapidly rising following the expectation of pro-growth policies. Trump has indicated he intends to promote corporate tax cuts and increased spending for infrastructure projects, which are projected to boost inflation. The Fed has been seeking higher inflation rates closer to 2 percent before raising interest rates too aggressively - inflation is currently at about 1.5 percent.

Fed expecting more growth, gradual rate increases

Fed officials said they expect to raise interest rates a few more times throughout 2017, dependent on continued economic growth. The national unemployment rate is currently about 4.6 percent and the GDP expanded by about 3.2 percent in the 3rd quarter of 2016.

Mortgage interest rates have been rising since the Nov. 8 election but were not dramatically affected by the Fed's announcement this week since markets have long factored a bump into projections. To learn more about rates available to purchase a home or refinance, contact a Vertex Loan Advisor at 877-939-0339.

Tuesday, September 27, 2016

Median income shows solid gains, stock markets close higher

U.S. Census bureau data shows median U.S. income gained more than 5 percent in 2015 to about $56,500, as reported at

The Census Bureau released some positive economic data earlier this month, finding that the median U.S. income rose to $56,516 in 2015, more than 5 percent higher than a year prior. The bureau also found that the number of Americans living in poverty dropped by 3.5 million, the highest amount reduced since 1968.

These are significant milestones for post-Recession economic progress, as wages have not increased as quickly as the number of jobs added since 2009. This newer income data suggests that wages are finally catching up.

Fed stalls again on rate hike; stocks respond to U.S. presidential debates

A more sluggish August jobs report, however, prevented Federal Reserve members from raising the central bank's benchmark rates at its September meeting once again - there has been no rate hike yet in 2016. To members of the Fed, 151,000 new jobs added in August and a steady unemployment rate at 4.9 percent is acceptable, but not strong enough to validate raising rates yet. The next Fed meeting will be held in December, following the 2016 general election.

Monday night's first U.S. presidential debate proved to be a boon to the stock market, reacting favorably to a perceived debate victory by Democratic candidate Hillary Clinton. The former first lady is viewed by stock investors as a more predictable option compared to her Republican opponent, real estate maven Donald Trump. The stock markets will likely see more fluctuation leading up to the election in early November.

Friday, August 12, 2016

July consumer spending cools, stalling chance of rate hike

Sporting goods retailer Sports Authority, headquartered in Englewood, Co., closed its last standing stores in July.

Oil and gas profits down, online spending up

Retail sales across the U.S. remained flat in July, suggesting that Federal Open Market Committee members will refrain from raising the central bank's interest rates for some time until more tangible growth is seen.

Lower gasoline prices in July were one reason for the tepid sales following stronger growth in June. Cheaper gas did boost car sales, which may have pulled consumers away from spending on other products.

Another area of strength was online shopping, while brick and mortar stores struggled. Consumers are increasingly spending more online than in department stores, as retailer Macy's slashes its number of stores. Locally in Colorado, sporting goods powerhouse (and namesake of the Denver Broncos' stadium) Sports Authority shuttered its last stores nationwide in July after filing Chapter 11 bankruptcy.

The coming weeks and months will tell whether July was an anomaly in spending - especially following several reports of solid jobs data - or if there is a larger American spending shortage. The U.S. dollar continues to stay strong compared with other currencies, also helping to temper inflation.

As long as consumer spending is stunted and inflation is well under the benchmark of 2 percent, most economic analysts expect no significant change in interest rates, currently at near all-time lows.

Friday, May 6, 2016

As rates remain low, borrowing on the rise

The average wage rose 8 cents in April to $25.53 per hour, according to the latest U.S. jobs report.

The U.S. April jobs report is in and it bears less than stellar news: only 160,000 new jobs added to the economy, much lower than the 200,000 jobs expected. While The Atlantic described it in a single word, "meh," the tradeoff is that jobs that were added are higher paying. Unemployment remained even at 5 percent.

The most positive news for job holders is that wages increased 8 cents an hour to a nationwide average of $25.53. Large job gains were seen in more "white collar" positions, i.e. tech-related industries. Wage growth has been considered a key benchmark to signify real economic improvement.

A poorer jobs report does translate to continued low interest rates. Lower rates encourage more loans and credit taken out, and as proof, consumer borrowing has hit its highest point in nearly 15 years. More borrowing also indicates stronger confidence in financial growth and ability to pay off future debt balances.

This month's job numbers make a rate hike by the Fed less likely at their June meeting. With higher home values and low interest rates, it's a great time to contact your Loan Advisor to see if you can take advantage of current market opportunities.

Wednesday, March 16, 2016

Fed votes to keep rates steady

The consumer price index showed modest growth in February, according a recent U.S. Labor Department report.

The economy is showing growth, but more will be needed before raising the benchmark interest rates again, the Federal Open Market Committee decided Wednesday.

Fed chairwoman Janet Yellen said Wednesday that based on economic projections for continued steady growth, she expects the FOMC to approve slight rate increases twice before the end of 2016. For now though, rates are staying put.

Among the positive U.S. economic signs noted were continued low unemployment and slight gains in consumer prices, indicating some inflation. The consumer price index, excluding food and oil, increased 0.3% in February for the second month straight.

The marked drop in oil prices over the past year and half have been a major factor in preventing inflation gains. The gasoline index plunged 13.0% in February. Conversely, however, economists including Yellen expect money that consumers save at the gas pump will eventually be circulated back into the economy, boosting consumer spending and GDP growth.

Wednesday, February 10, 2016

Yellen: Fed expecting to stay the course, could be delays

Fed chairwoman Janet Yellen speaks Wednesday to the U.S. House Financial Services Committee on the state of the economy.

Federal Reserve chief Janet Yellen met with U.S. Congress members Wednesday and spelled out the Fed's intentions to tentatively move forward with gradual rate hikes in 2016, economic conditions permitting.

The Fed made its first move to raise rates in nearly a decade in December 2015 after years of anticipation. It was only a slight raise of a quarter of a percent, which Fed officials have said would continue to be the plan for future rate hikes. However, a turbulent stock market and global economic environment have raised concerns over whether additional rate increases would be wise.


Stocks still suffering

As oil prices have continued to fall to under $30 per barrel, the Dow Jones industrial average and Nasdaq composite index have struggled mightily, with investors shaky on GDP growth and slow inflation. The indices ended Wednesday split, with the Dow down 100 points and Nasdaq up 0.4% after Yellen's remarks to the U.S. House Financial Services Committee.

It is important to understand that Fed officials will only make adjustments to the central bank's interest rate - which mortgage rate trends are loosely modeled after - after careful consideration of the state of the economy. If stocks continue to tank, unemployment rates change for the worse and wages stagnate, expect a long period of waiting before the Fed hikes rates again.

Wednesday, January 27, 2016

Oil prices flounder, stock markets plunge, and Fed expresses doubt

The Federal Reserve's Open Market Committee held its first 2016 meeting this week, but it wasn't all roses and sunflowers following their historic move to start boosting interest rates in December.

Instead, Fed committee members expressed doubt about the U.S. economy's blossoming growth, which they said slowed late in 2015 despite an improved job market.

Oil prices continue to drop amid global economic unrest, particularly in China, one of the world's most influential economies. Private sector powerhouses Apple and Boeing have produced poor outlooks this month, which also dragged stock market industrial averages lower this week.

The Fed will hold its next meeting in mid-March, and depending on how the economic picture adjusts, a slight increase in central interest rates is possible. Many analysts expected four slight rate increases to come in 2016, but that will largely depend on how Fed officials interpret economic data in coming months. They will be paying attention to see if wage growth, stock markets and inflation rates improve before budging on interest rates.

Friday, January 8, 2016

Yin and yang: Good news greets end of bad week for stock market

Shanghai, China's skyline is pictured at night.

Stock markets take a hit, but 2015 jobs data comes in strong

The first full week of 2016 was marked by the U.S. stock market's worst week of losses since 2011.  The Dow Jones industrial average, Standard & Poor's and Nasdaq indices all dropped about 1 percent, respectively.

Stock markets were dominated by concerns over China's stunted economic growth as well as oil prices continuing to fall. A barrel of crude oil was selling for less than $34, the lowest figure since 2004.

To answer the week of losses, however, the December jobs report came in Friday with rosier figures. About 292,000 non-farm jobs were added to U.S. payrolls and the unemployment rate stayed steady at 5 percent despite more people entering the job force. Overall in 2015, roughly 2.65 million American jobs were added to the economy, the second highest total since 1999.

Although wage growth reversed slightly in December, wages rose on average 2.5 percent overall in 2015, a decent figure considering price inflation was nearly nonexistent for the year. The average hourly wage for an American worker clocked in at $25.24 to end 2015.

While the stock markets suffered, mortgage interest rates dropped to end 2016's first week. As long as global economic fears persist and oil prices slump, interest rates should stay at very attractive levels.