Weekly Forecast Update: ISM Non-Manufacturing Index, Mortgage Purchase Applications, Jobless Claims, Employment

A weekly analysis of the economic data released during the past week, and how current economic conditions are affecting the real estate market.

• Pending Home Sales were released today. Read the press release here >

• The ISM non-manufacturing index rose to 53.2 for September, up from 51.5 in August. A score above 50 points to an expansion in the non-manufacturing sector. New orders rose from 52.4 to 54.9, while inventories, current production, and backlogs all fell. Exports jumped from 46.5 to 58.0 over this period, a strong sign, but exports account for a small share of total production. Of importance was the rise in non-manufacturing employment by two points to 50.2 in September.
• New jobs are critical to a sustained economic expansion. This report showed a decline in current production, but an improvement in current employment and future production, a good sign for sustained hiring. This sector has shown steady improvement over the last nine months and the uptick in orders points to continued expansion this fall. Job creation will help consumer confidence and spending, but much more is needed.

• Mortgage purchase applications increased 9.3 percent for the week ending October 1. Applications are at their highest level since May. Purchase applications do not take into consideration all-cash purchases which according to the August REALTORS® Confidence Index made up 28 percent of transactions.
• Mortgage purchase applications were down 35.1 percent from the same week a year ago.
• The government (FHA) portion of the index rose strongly at 17.2 percent week-over-week, while conventional purchase applications were up only 3.6 percent. Part of the reason for the jump may be a result of new FHA restrictions on credit score and down payment going into place October 4, 2010.
• Refinances fell 2.5 percent yet still made up 78.9 percent of mortgage activity as mortgage rates fell to a new survey low of 4.25 percent for a 30-year fixed mortgage.
• Private sector employment fell 39,000 in September, bad news for the struggling employment market. Friday the government will release the official numbers for September.

• This was another positive week for the job market with the number of new jobless claims falling by 11,000 to 445,000. This is their lowest level since July 10th of this year. The four-week moving average, which tunes down weekly volatility in the data, also feel by 3,000.
• Jobless claims at this time last year stood at 531,000. The number of continuing claims also fell by 48,000 to 4.462 million. Last year, this number was at 5.987 million.
• The state by state analysis shows that largest decrease in the new claims was in New York due to fewer layoffs in the construction and service industries. In contrast, California had the largest increase in new claims, additional 8,960 claims, due to layoffs in the service industry.

• While nonfarm payroll employment declined by 95,000 in September, there was job creation in the private sector of 64,000 jobs
• Government employment saw the largest job declines of 159,000, which reflects 77,000 temporary jobs for Census 2010 and 76,000 jobs in local government.
• The unemployment rate was unchanged at 9.6 percent.
• Creation of new jobs is essential to economic recovery. While the creation of new private sector jobs is a positive sign, the current level is treading water compared to where creation needs to be at.
• From January to September, there have been over 800 private sector jobs created. Though positive, such a pace is frustratingly slow.