Trucking Spot Rate, Jobs Report, Record Home Appreciation

Trucks and Truckers are the backbone of the US economy, accounting for 70% of the nation’s freight. Approximately 80% of trucking contracts are negotiated in advance but there is always an on-demand rate or “Spot Rate” (think calling an uber) which is set by supply and demand. This rate is sometimes considered a bellwether of the economy and a recession indicator. Since 2020 the rate has been ticking steadily up, but over the last two months the Spot rate has come down about 15%.

Mortgage Rates – ticked up again this week as the price of Mortgage Backed Securities continues to erode. Rates are up approximately 2.5% from this time last year and at their highest levels since 2008.

Jobs – the BLS Jobs Report for April showed that unemployment remained stable at 3.6%. Both hourly and weekly earnings increased by 0.3% for a respective annual increase of 5.5% and 4.6%. These numbers were slightly lower than expected, the pace of increase is slowing. Within the household survey there were 353,000 job losses and 363,000 people left the labor force which means unemployment levels are stable for the wrong reasons. The U-6 or all-in unemployment rate increased from 6.9% to 7% which is the first uptick we have seen in a while.

Home Values – increased by a staggering 3.3% in March. This brings the year over year increase to 20.9% – the highest reading in the 45-year history of the index. Core Logic is now forecasting 5.9% growth in the next 12 months which is a 5% increase from their previous prediction. Remember that 6% appreciation on a $400,000 home is $24,000 in 12 months.

Fed – the Federal Reserve increased the Fed Funds Rate (the overnight rate banks lend each other money at) 0.5% for the first time in 22 years (usually they hike 0.25%). Fed chair Jerome Powell also ruled out a 0.75% rate hike and announced their balance sheet reduction plan. Starting June 1st the Fed will reduce their balance sheet by $47.5B – $30B in Treasuries and $17.5B in MBS. This will continue through August and in September the pace will double. Their current balance sheet is at $9T so it won’t make a huge dent. The rate hike and announcements were positive for MBS and caused them to move up nicely (if only briefly for one day).

Mortgage Applications to purchase homes increased by 4% last week and are down 11% year over year. When factoring the increase of cash buyers the amount of purchase activity is down approximately 9%. Refinances volume remained stable and is down 71% year over year.

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