There were only 74,000 new jobs created in December according to the Labor Department's employment report, way below the consensus forecast for 200,000. But not to worry. They say it was probably due to the cold weather in December, especially for the construction industry.
The Commerce Department reported on Friday that new housing starts plunged 9.8% in December, and permits for future starts fell by 3.0%. Housing completions (previously started homes) fell by 10.8%. Again, not to worry. It was also probably due to the cold weather.
I hope so.
Because the Mortgage Bankers Association has been reporting mortgage applications plunging since last May, well before weather could be a factor, applications ending December at the lowest level in 13 years.
Major banks reported 4th quarter earnings this week, with plunging mortgage activity showing up as significant.
JPMorgan Chase (NYSE:JPM) reported mortgage originations in the 4th quarter were down 54% from the year-ago quarter. Wells Fargo (NYSE:WFC) reported its mortgage application activity fell 25%. Citigroup (NYSE:C) reported its revenues from retail banking plunged 35% largely due to lower U.S. mortgage activity. Bank of America (NYSE:BAC) reported its mortgage origination volume plunged 46% in the 4th quarter from the same quarter a year ago.
It's difficult to blame those quarterly declines on December's weather, especially since major banks warned last September that they were closing numerous mortgage-related offices and laying off several thousand employees in anticipation of continuing large declines in mortgage activity. The Fed's Beige Book, released this week, noted that some mortgage lenders have completely exited the business, shifting focus to small business and commercial real estate loans.
Meanwhile, auto sales slowed significantly in December. The University of Michigan/Reuters Consumer Sentiment Index, measuring the optimism of consumers, declined to 80.4 in December, well below the consensus forecast of an improvement to 84.0. Even investor confidence has declined, at least according to the poll of its members by the American Association of Individual Investors. In its weekly poll this week, the percentage of bullish investors declined to 39% from 55% at the end of the year.
With the Fed beginning to taper back its stimulus, believing the economy can now stand on its own with less, it is probably also hoping the disappointments were all due to December's weather.
So far the stock market has had no problem in accepting the weather reasoning.
But if my expectation that ongoing Fed support and favorable seasonality will be enough to keep the bull market going into the spring is to play out, robust 'catch-up' numbers in housing, auto sales, jobs, and consumer confidence, had better begin to show up for January.