Morning Report: Exporters are cutting jobs

Vital Statistics:

	Last	Change	Percent
S&P Futures	2020.5	1.5	0.07%
Eurostoxx Index	3256.1	17.3	0.53%
Oil (WTI)	47.35	1.0	2.09%
LIBOR	0.317	-0.003	-1.08%
US Dollar Index (DXY)	94.56	0.184	0.19%
10 Year Govt Bond Yield	2.01%	-0.01%
Current Coupon Ginnie Mae TBA	105
Current Coupon Fannie Mae TBA	104.5
BankRate 30 Year Fixed Rate Mortgage	3.8

Markets are flattish this morning as earnings come in. Bonds and MBS are flat.

Consumer sentiment increased in October, according to the University of Michigan.

Job openings fell in August to 5.37 million from 5.67 million the month before. 

Industrial production fell by 0.2% in September, and manufacturing production fell by 0.1%. The strong dollar and overseas weakness is obviously having an impact on exporters. Capacity Utilization fell to 77.5%. Capacity utilization hit a post-crisis high about a hear ago at 79% but has been falling ever since. This is going to concern the Fed, but keep in mind that manufacturing isn't the dominant economic force that it was 20 or 30 years ago. 

Needless to say, when exporters are facing headwinds like a strong dollar and weak overseas economies, they start cutting jobs. The biggest industries affected: transportation equipment, machinery, computer and electronic products, and primary metals. You can see below the trend in export employment versus employment overall. 

Inflation remains tough to find. Social Security recipients will get no cost of living adjustment this year. Yet another excuse for the Fed to stand pat in December. 

The Federal government now backs 50% of all mortgage loans made in the US. To put that number in perspective, in 1981, the Federal government backed about 7% of mortgages in 1981. Banks are reluctant to portfolio as many mortgages as they used to, which makes sense - anyone with grey hair knows how the banks got absolutely annihilated by their mortgage portfolios in the 1970s when rates went up dramatically to combat inflation.