The Bureau of Labor Statistic of the U.S. Department of Labor released yesterday that real average hourly earnings for all employees rose 0.2 percent from October to November. This meant a year over year increase of 0.9 percent from November 2012, seasonally adjusted.
The real earnings are computed by adding (or subtracting) the increase in wages with the Consumer Price Index (CPI). For November, the CPI was unchanged from October. The unadjusted year over year change was up 1.2 percent over last November for the CPI. When subtracting the volatile food and energy components, the yearly change was 1.7 percent, with a significant change coming from lower energy costs overall, especially in gasoline and fuel oil. Gasoline has been falling the past two months after spiking significantly in June.
Food has continued to increased slightly for in home purchase but more pronounced in food away from home. Real earnings were also boosted by an 0.3 percent increase in the average workweek both for November and year over year.
Based on these and other recent reports, the Federal Reserve announced yesterday that since the economic activity is expanding at a moderate rate they would change their bond purchasing. According to the Fed, labor market conditions have shown further improvement, the unemployment rate has declined but remains elevated, household spending and business fixed investment advanced and the housing sector has slowed somewhat in recent months. Also, long term inflations expectations have remained stable.
Based on this information, the Fed will decrease purchase of agency (Fannie Mae and Freddie Mac) mortgage-backed securities and longer term Treasury securities at $40 billion per month instead of the previous $45 billion per month each. “The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.” according to the release.
About the author: Fred Chamberlin was a senior loan officer with Guild Mortgage Company in Oak Harbor. He was in the mortgage origination business for over 20 years and in the lending business for over 30 and authors a number of mortgage related blogs.