• Jobless Claims Rise, Mortgage Rates Drop Below 5%, Factory Orders Beat Expectations

    Jobless Claims Rise

    Initial claims for unemployment insurance rose again last week in what has otherwise been a strong employment market for the past several months, with layoffs remaining muted despite high inflation and other pandemic-spurred dysfunctions.

    But this week’s news of job cuts at three high-profile companies — Walmart, Geico and Robinhood Markets — don't help the employment picture at a time when analysts and corporate leaders around the country are warning of a recession as soon as this year.

    The Labor Department said Thursday there were 260,000 initial claims for unemployment insurance for the week ending July 30, up 6,000 from the prior week, as the four-week moving average rose by the same number to 254,750. The next indicators of where this is heading should arrive in the next few days as the government reports July figures for unemployment, historically low at 3.6%; and annual inflation, at a 40-year high of 9.1% as of June.

    Real estate fallout has already surfaced. As first reported in June by CoStar News, online stock brokerage Robinhood was offloading much of its office space in Silicon Valley, just a year after a major expansion in its home base of Menlo Park, California. Media reports this week said Robinhood was planning to close offices in Charlotte, North Carolina, and Tempe, Arizona.

    In a blog post this week, Robinhood CEO Vlad Tenev announced a 23% reduction in the company’s full-time staff in a second round of cuts since April that's expected to bring total layoffs to more than 1,000. Tenev said the April layoffs “did not go far enough” in helping Robinhood reduce expenses as part of a larger reorganization.

    Also this week, the Sacramento Bee reported that insurance giant Geico, part of Berkshire Hathaway, had closed all 38 of its California offices, laying off more than 100 as it shifts to fully digital services in the state and exits what CoStar data shows is more than 300,000 square feet of office space. And the Wall Street Journal reported that Walmart was planning to cut about 200 corporate jobs in departments including merchandising, global technology and real estate, as it braced for an expected drop in profits.

    Mortgage Rates Drop Below 5%

    An economy sending mixed signals is also confounding traditional thinking about what’s supposed to happen when the Federal Reserve raises its key lending rate several months in a row, with more hikes possibly on the way. Interest rates for other types of borrowing are also supposed to soar, but home mortgage rates have actually been falling in the past few weeks.

    The 30-year fixed rate mortgage averaged 4.99%, down from last week’s 5.3% and dropping below 5% for the first time since April, according to results of a weekly lender survey released Thursday by the Federal Home Loan Mortgage Corp., a government-sponsored entity better known as Freddie Mac.

    “Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, especially as the Federal Reserve attempts to navigate the current economic environment.”

    Freddie Mac reported that 15-year fixed-rate mortgages were averaging 4.26%, down from last week’s 4.58%. Both 30-year and 15-year loans are still well above year-ago levels of 2.77% and 2.10% respectively, contributing to slowdowns in mortgage applications and home sales.

    Factory Orders Beat Expectations

    In a potential sign of a rebounding industrial economy, new orders for manufactured goods in June rose $10.8 billion or 2% from the prior month, reaching $555.2 billion, the Commerce Department reported this week. This outpaced analysts' expectations and marked the 13th month of increases during the past 14 months.

    Shipments of factory goods rose $6.3 billion, or 1.1%, to $551.9 billion, with shipments now rising in 25 of the past 26 months. Still, unfilled orders also rose 0.7% to $1.1 trillion, marking 22 consecutive months of increases as automakers and some other manufacturers encounter delays in procuring necessary parts.

    New orders for durable goods, meant to last more than three years, rose 2% to $272.9 billion in June and have risen eight of the last nine months. Transportation equipment led increases for durable goods orders.

    Source: www.CoStar.com