Daily Commentary by Larry Baer: No later than 11:59 p.m. ET tonight President
Obama will be forced to give the order for $85 billion of across-the-board
government spending cuts to begin. Barring any last minute political
breakthrough, Uncle Sam's belt tightening - known as "sequestration"
in the press -- will be "a done deal". The impact of the
government spending cuts won't really be felt or clearly reflected in
forthcoming economic data for many weeks or probably months to come.
It all sounds pretty
dramatic - but Congress and the White House can rescind these big spending cuts
at anytime they decide to. The structure of the legislation mandating
"sequestration" is really not automatic - it is not a "card laid
is a card played" kind of thing. What will happen from today forward
will be weeks and perhaps months of political bickering and saber rattling to
buy time for Congress and the White House to come up with a viable plan to
kick-the-can-down-the-road and simultaneously lay the blame for any pain
suffered by the voters squarely at the feet of the opposing party.
My sincere hope is
political courage and leadership among all the parties involved will emerge and
decisions for the common good of the country and its long-term fiscal soundness
will prevail. My expectation is that Congress and the White House will
once again prove to its global creditors that it is woefully lacking the
ability to make any sustained commitment to address the nation's rapidly
deteriorating financial condition. The latter scenario, should it
actually develop, will have an increasingly burdensome impact on the ability of
mortgage interest rates to move notably lower from current levels.
Looking ahead to
next week -- Tuesday's Institute
of Supply Management Service Sector Index
will take a distant back seat to Friday's February Nonfarm Payroll
report.
Mortgage investors
have already priced-in expectations for a February headline jobs number of
165,000 and a national jobless rate holding steady at 7.9%. If the actual
numbers match or closely approximate the consensus estimate -- this report will
have little, if any, noticeable impact on the trend trajectory of mortgage
interest rates. A headline nonfarm payroll number greater than 170,000
and/or a national jobless rate of 7.8% or less is almost certain to push
mortgage rates higher. While a stronger-than-expected February payroll
report is possible - at this juncture it is not deemed to be very probable.
THE MARKET
IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
