My How Times Change

You may be thinking that we are talking about how the world has changed over the years. For example, who would have thought that a conversation with our children would most likely occur through texting on a machine that many of us did not even grow up with years ago? Here we are talking about how things change from week-to-week. During the past few weeks we have been illustrating factors before and against a rate increase orchestrated by the Federal Reserve Board, whose "Open Market Committee" meets next week.

On the plus side we had a strengthening economy and the creation of jobs. On the negative side we had a correcting stock market, a stronger dollar, a slowing economy overseas and plunging oil prices. In just a couple of days, the stock market rebounded significantly, we had a significant upward revision in the estimate for our economic growth in the second quarter and oil prices rebounded sharply as well. In a matter of a few days, we went from not at all expecting a rate increase to thinking that a rate increase could happen. Just to make things interesting, a few days later, stocks and oil prices reversed again. If you are confused, think how the Fed must feel considering this decision.

And then came the jobs report. What did the jobs report tell us? Even though the addition of 173,000 jobs was less than expected, the unemployment rate dropped to 5.1%, the previous month number of jobs added was revised upward and wages grew a bit more than predicted. Overall, this report is a positive one for the economy and, therefore, increases the chance of a rate increase next week. Most analysts are putting the chances of an increase at 50-50 right now. Though, one thing we can tell you is that the Fed does not like major uncertainty. And there is plenty of uncertainty out there right now. Too much uncertainty may be the overriding factor determining the results of this decision.

Mike Ervin
Branch Manager/Mortgage Banker
NMLS: 282715
O: 650.451-7797
C: 650.766.8500 
mike@mikeervin.com