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Daily Market Commentary for February 23, 2012

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Labor Department reported Thursday that new applications for unemployment benefits were unchanged last week however, they remain at a level consistent with an improved U.S. jobs market. President Barack Obama signed a bill on that continues extended benefits until the end of the year. The Labor Department said initial claims were flat at a seasonally adjusted 351,000 with the level of claims used as a gauge of whether layoffs are rising or falling. Four-week average of claims fell by 7,000 to 359,000, striking the lowest level seen since March 2008. Monthly average provides a more accurate view of labor-market trends by reducing week-to-week gyrations caused by seasonal quirks. When applications for jobless benefits drop below 400,000, this indicates a general sign that hiring is generally as on the rise. New applications for jobless benefits have fallen under that mark in all but two weeks over the last four months. Monthly employment reports provide a clearer picture of who is hiring and who is not. The U.S. economy still is not adding jobs at a pace fast enough to repair most of the damage caused by the 2007-2009 recession. While unemployment rate has declined from a 2011 peak of 9.1%, it remains high at 8.3%. When including part-time employees who cannot find a full-time job as well as those who recently stopped looking for work, unemployment rate is even higher at a rate of 15%. The U.S. jobless rate would not return to pre-recession levels for at least several years, at the current rate of hiring. From 2001 to 2007, unemployment rate averaged 3.8% to 6.2%. Continuing claims decreased by 52,000 to a seasonally adjusted 3.39 million in the week ended February 11, per the Labor Department. Continuing claims, which are handled by states, typically last 26 weeks and are reported with a one-week lag. The number of people who received extended federal benefits fell by 68,966 to 3.41 million. The new extension reduces the maximum amount of time people can receive extra federal benefits to no more than 73 weeks, down from 99 under previous law. Nearly 7.50 million people received some type of state or federal benefit in week ended February 4, down 178,619 from previous week. Total claims are reported with a two-week lag and are not seasonally adjusted.

According to weekly survey from Freddie Mac conforming mortgage rates released Thursday, interest rates on 30-year fixed-rate mortgages climbed to an average 3.95% this week, up from 3.87% last week. A year ago in 2011, the average mortgage rate was 4.95%. For the week ending February 23, 15-year fixed-rate mortgage averaged 3.19% , up from 3.16% last week with the average mortgage rate a year ago at 4.22%. Adjustable-rate mortgages fell this week, with the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaging 2.8%, down from 2.82% last week and 3.8% a year ago in 2011. The 1-year Treasury-indexed ARM averaged 2.73%; down from 2.84% last week and 3.4% a year ago in 2011.

During Q4, auto lending continued to expand, as more loans were made to borrowers with shaky credit and payment rates improved. From year earlier levels of $658 billion, amount of outstanding auto loans rose 3.8%, or $23.9 billion. A portion of the expansion was driven by a deeper move into subprime loans, with new-vehicle loans to consumers with less-than-stellar credit increasing by 13.8% in the quarter. Auto lending continued to expand during Q4 as more loans were made to borrowers with shaky credit and payment rates improved. While the average credit score for borrowers receiving new and used loans fell six points and nine points respectively, payment performance improved during Q4. The rate of loans 30 days or more past due fell to 2.79% from 2.98% a year ago. Delinquencies on other types of loans, including credit cards and personal loans also improved since the start of the recession as borrowers have buckled down to pay off debt and cautiously taken on new debt.


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