[Adam in CO]

Mortgage Market News for the week ending August 1, 2008

Events This Week:
Employment Fell
GDP Higher
Confidence Rose
Manufacturing Mixed

Events Next Week:
Mon 8/4
Income
Tues 8/5
FOMC Meeting
ISM Services
Thurs 8/7
Pending Sales
Fri 8/8
Productivity

Employment Falls

After dominating the headlines recently, there was little fresh news about Fannie Mae and Freddie Mac, and investors focused their attention on the economic data. Friday's Employment report closely matched the consensus forecasts, while most of the other data this week was a little weaker than expected, and mortgage rates fell modestly during the week.

In July, the US economy lost about 50K jobs, but the job counts for May and June were revised higher. The Unemployment Rate rose from 5.5% to 5.7%, mainly due to an unexpectedly large number of young adults looking for summer work and being counted as part of the labor force. The construction and manufacturing sectors showed continued weakness.

Thursday's economic data contained the week's biggest surprises. Second quarter Gross Domestic Product (GDP), the broadest measure of economic activity, increased just 1.9%. This was higher than the first quarter, but was well below what is considered the average level of growth of 3.0%. In addition, after holding below 400K nearly every week this year, Jobless Claims jumped to almost 450K. Future readings of GDP and Jobless Claims will be closely watched to see whether the economy is accelerating or heading for a recession.

• Also Notable:
• The Housing Bill passed both houses of Congress and was signed into law by President Bush
• In July, the Unemployment Rate rose to the highest level since March 2004
• Former Fed Chief Greenspan suggested that there is a fifty-fifty chance that the US economy will slip into a recession
• After dropping as low as $120 per barrel, oil prices ended near $125 p/b, down from a record high of $147 p/b in July

Average 30 yr fixed rate:
Last week:-0.11%
This week:-0.05%

Stocks (weekly):
Dow:11,334-52
NASDAQ:2,311+6

Week Ahead

Next week's economic news will be dominated by Tuesday's Fed meeting. No change in rates is expected, but the accompanying statement will be closely scrutinized for signals about the timing of future rate hikes. Overall, the prevailing sentiment is that the Fed is more concerned about stabilizing the economy than about preventing inflation.

Personal Income and Factory Orders will come out on Monday. ISM Services will be released on Tuesday. Pending Home Sales, a leading indicator for housing market activity, is scheduled for Wednesday. Productivity will be the final report on Friday. Treasury auctions and a policy announcement from the European Central Bank will round out the Economic Calendar.

admin@corefinancegroup.com