Since 1958, when the Indiana Jones of Economists discovered an inverse relationship between wage increase and unemployment, the Phillips curve has been a lens policy makers use to understand their economies. This curve proved accurate until the Great Recession in 2008. Unemployment spiked and the government pumped money into the economy to bring jobs back. The unemployment rate decreased steadily to 3.5% in 2020 without any major inflation. Now we are seeing much higher unemployment levels than the great recession. As folks return to the workforce will the Phillips Curve stay in hibernation? Will the Fed continue to maintain their target of 2% annual inflation? Or has inflation already started, cloaking itself in the veil of shortages on items like lumber & garden gnomes?

Rates – moved mostly sideways this week with minor fluctuation. Mortgage Backed Securities are trading at the same price they were at the end of last week. Interest rates are down 1/4% from this time last year.

Home Prices – increased 1% during February and 12% between Feb. 2020 and Feb. 2021. That means a $400K home purchased in Feb. 2020 would be worth $448,000 + 2 months of appreciation.


Jobs – the number of people filling for unemployment for the first time decreased to 553K (up from 200K pre pandemic). 16.5M folks are still receiving unemployment benefits of some type (pre-covid closer to 2M) which is down from a 20M peak.

Mortgage Application volume decreased 2.5% from the previous week. Purchases are up 34% on a year over year basis while refinances are down 18%.

Fed chair Jerome Powell gave no indications of when they would hike rates or taper the purchasing of Mortgage Backed Securities He believes inflation is transitory.

Inflation – the Personal Consumption Expenditure showed year over year inflation at 1.8% for the core reading which strips out food and energy prices. This is the Fed’s favorite measure of inflation. If we get a similar reading next month the year over year reading will be closer to 2.6%.

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