Late on Election Eve and I thought I would try to get out the weekly newsletter with some tidbits on the week’s impact on real estate financing rates. (Side note, the clock has already moved to Tuesday on the East Coast prompting this tweet from @staypuft: November 6th, 2012. The best election day 6 billion dollars can buy. #HereWeGo)
The news on Friday of jobs creation was received with some fanfare. The initial take was that the jobs created exceeded all estimations. There was a bit of happiness in the markets that lasted for about 2 hours. As you can see from the chart at the right, the uptick in rates (here the US Treasury 10-year note) reversed itself into the late morning trading. As the truth settled in, the better-than-expected number, even with the August/September upward revisions still has the job creation for the entire year of 2012 just barely keeping pace with the net monthly growth in employable aged population.
The only impact on the Unemployment Rate in the year can be attributed to people either stepping out of the search (thereby lowering the Unemployment percentage) or coming back in to the search but without a job (participation up, Unemployment also up.) The Jobs Creation chart at the left and the L-shaped recovery chart below and to the right are both from Bill McBride at www.calculatedriskblog.com. Thank you.
As I said on Friday, it will be painful to absorb the millions who need to step back in, but it must be done before we can be “healthy”. The “L” shaped recovery looks like it will stretch us into a Japan-like, decade-long slide at this pace.
The Election may have some impact on the outcome of this. Above all, our leadership on Pennsylvania Avenue and on Capitol Hill will need to have recognition of the problems and resolve to work together to pull out in the post-election world.
Now to the election – just a couple of points. One is the Crystal Ball effort of a prognosticator I have found to be very neutral through the fray, Larry Sabato of UVA. His final prediction is: Obama 290 v Romney 248. Senate 53-47 D (no change) and House 239-196 R with a D pick up +3. And that is with Romney winning Virginia, a virtual coin toss. If that goes to Obama it would be a 303 electoral college win. Let’s see what actually plays out.
The strong feeling I got during the day is that our inspired, constitutional government with checks and balances will endure and will survive the outcome of either winning party, again. Both sides have demonized the other, but imperfections of individuals will not overcome the whole. Let’s hope for an accurate count and a quick decision.
The rules of Ohio, as an example, will require a recount IF the vote spread between the two candidates is less than ¼%. The concern for timing arises with a need for the counties to first certify the vote before a recount may begin. Unless the Ohio Secretary of State demands otherwise, the counties have until November 27th to certify. So if Ohio is in play needing a recount, it might me December before this can be accomplished. Let’s pray it is clear and that there are no reasons for voter fraud allegations.
The World continues on, not hanging on our election. Indeed, the election that may have more impact on interest rates in the coming week will be the Greek parliamentary vote Wednesday on accepting measures required to secure the needed bailout from the “Troika”. The possibility of a down vote is quite real with both the second and third largest parties in the Parliament (Pasok and Democratic Left) rattling sabers.
Tuesday, right before the vote in parliament, Greek labor unions will be staging a huge, multi-day general strike. The turmoil in our teapot is likely to be more reported on the US news, but the powder keg that is Greece will be much hotter. And watch for news from the credit reporting agencies during this week for possible downgrades of French bonds.
May your Election Day be memorable and may you enjoy living in interesting times.
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