Philadelphia Feeling: Federal Reserve Bank of Philadelphia Business Outlook Survey August 2011

The latest release of the Federal Reserve Bank of Philadelphia Business Outlook Survey (BOS) for August indicated dramatic weakness in the regions manufacturing activity with the current activity index plunging to a notable contraction level of -30.7 while the future activity index declined to a level of 1.4.



The current activity index along with most of the other "current" data points (new orders, unfilled orders, delivery time and inventories) are now indicating significant recessionary weakness in manufacturing activity with the size and breadth of the latest pullback clearly demanding that closer scrutiny be paid to these series in future releases.



The following chart shows the current and future activity indexes both with their corresponding 3-month moving averages. The red line marks the threshold between contraction and expansion for these diffusion indexes.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims August 18 2011

Today’s jobless claims report showed an increase to both initial and continued unemployment claims as a recent rising trend was called firmly into question for initial claims.



Seasonally adjusted “initial” unemployment increased 9,000 to 408,000 claims from last week’s revised 399,000 claims while seasonally adjusted “continued” claims increased by 7,000 resulting in an “insured” unemployment rate of 2.9%.



Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.



Currently there are some 3.65 million people receiving federal “extended” unemployment benefits.



Taken together with the latest 3.58 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.23 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – August 17 2011

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.



The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.



The latest data is showing that the average rate for a 30 year fixed rate mortgage declined 5 basis points to 4.32% since last week while the purchase application volume dropped a notable 9.0% and the refinance application volume increased 8.0% over the same period.



It's important to note that the average rate for a 15 year fixed rate mortgage is now sitting at the lowest level seen in at least four years.



The surge in refinance applications may have been influenced either by the looming credit downgrade (commonly reported as carrying to potential to increase interest rates) or by the recently publicized GSE loan limit resets or by both.



In any event, the purchase application volume is weak and remains near the lowest level seen in well over a decade while the surge in refinance activity is likely temporary.



The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).