For the past three quarters, the economy has grown
at an annual rate of just under 3.5% based upon the preliminary numbers released
in late January for the 4th quarter. This growth rate is even more impressive
when you consider the fact that we endured a government shutdown for part of the
last quarter of 2013. It is estimated that this shutdown knocked approximately
1% off the growth rate for the 4th quarter. A 3.5% growth rate, while not
smoking hot, is strong enough to bring down unemployment while not igniting
fears of inflation. A pretty good balance.
And this balanced growth is a good indication as to
why the stock markets rallied strongly in 2013 while long-term interest rates
rose. Now we ask whether this growth rate is sustainable for 2014. We had
several weak reports released in January, including the December jobs report and
a slowing housing sector. Some have hypothesized that the severe winter weather
in December and even worse weather in January is the culprit. If this is the
case, the numbers should bounce back--including the stock market and rates, both
of which fell in January.
Keep in mind that storms actually can boost some
sectors of the economy such as the use of energy. Our heating bills are telling
us that. Last week's release of January's jobs report was another mixed bag with
the unemployment rate unexpectedly moving down slightly to 6.6% but the total
jobs created below forecast at 113,000. It is interesting to see both the number
for January and also the revision of the previous months' numbers as there was
very little adjustment to the disappointing December release but upwards
adjustments in previous months. Weather related slowdown? With regard to jobs
creation we certainly hope this is the case. We think everyone is hoping for a
warmer February, though it has not started out that way.
Mike Ervin
Branch Manager
NMLS: 282715
W.J. Bradley Mortgage Capital, LLC
O: 650.735.5261
C: 650.766.8500
