Daily Commentary by Larry Baer: The economy grew in the fourth-quarter - but just
barely. Government data wonks issued their final "guesstimate"
of the pace of economic growth for the fourth-quarter earlier this
morning. The economy expanded at a 0.1% pace during the last three months
of 2012, better than the initially reported decline of 0.1% -- but well below
the third-quarter pace of 3.1%.
The media's talking
heads are enthusiastically declaring economic growth for the balance of the
year will build rapidly after the slowdown at the end of 2012. Perhaps --
but in my book there is a big difference between what is possible - and what is
probable.
It seems to me the
combined "whammy" of a 2 percent payroll tax and the implementation
of tomorrow's $81 billion "sequestration" government spending cut
will not
contribute to improvement in overall economic growth for the balance of this
year. The bi-partisan Congressional Budget Office has issued a forecast
that suggests the minimum "sequestration" impact will likely take a
1.5% bite out of 2013 economic growth. Add that number to the expected
0.5% hit economic growth is anticipated to take as a result of the increase in
payroll tax -- and it becomes very difficult to jump on the surging economic
growth bandwagon. The good news is slower economic growth
will tend to support steady to fractionally lower mortgage interest rates - the
bad news is slower economic growth will almost certainly hamstring new and
existing home sales.
Mortgage investors
completely shrugged off a separate report from the Labor Department this
morning which showed the number of Americans filing first-time jobless claims
fell by 22,000 during the week ended February 23rd. Large
federal employment furloughs are coming in subsequent weeks -- so any near-term
improvement will almost certainly soon be eclipsed by significant
numbers. In the convoluted world of mortgage interest rates -
deteriorating conditions in the labor sector tend to be supportive of steady to
perhaps fractionally lower mortgage interest rates.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
