Mortgage Pros, Inc.

Oct. 30 (Bloomberg) — Spending by U.S. consumers fell in September for the first time in five months after the government’s auto-rebate program expired.
The 0.5 percent decrease in purchases matched the median estimate of economists surveyed by Bloomberg News and followed a
1.4 percent jump in the prior month, Commerce Department figures showed today in Washington. Incomes were unchanged, while the savings rate climbed.
Stagnant wages and concern over mounting unemployment are causing confidence to wane, raising the risk that consumers will retrench in coming months as government assistance programs such as the so-called cash-for-clunkers plan expire. The report also showed inflation was lower than the Federal Reserve’s long-term projection, indicating the policy makers can keep rate low.
“September as a total was quite weak, but a lot of that can be traced to autos,” Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, said before the report. “Government assistance has probably taken consumers about as far as they can go.”
The median forecast for spending reflected responses from 75 economists surveyed. Projections ranged from a decline of 0.9 percent to a gain of 0.5 percent. The government revised the August reading up from an originally reported increase of 1.3 percent.
Wages and salaries dropped 0.2 percent after a 0.2 percent gain the prior month as job losses mounted.
To contact the reporter on this story:
Timothy R. Homan in Washington at +1-202-624-1961 or thoman1@bloomberg.net
To contact the editor responsible for this story:
Chris Wellisz at +1-202-624-1862 or cwellisz@bloomberg.net

U.S. Third-Quarter Labor Costs Rise 0.4% as Wage Growth Stalls
2009-10-30 12:30:00.410 GMT
By Courtney Schlisserman

Oct. 30 (Bloomberg) — Employment expenses in the U.S. rose 0.4 percent in the third quarter and wages had the smallest 12- month gain since 1982, as the sluggish labor market restrains compensation.
The increase in the employment cost index was the same as the gain in the second quarter, according to Labor Department data released today. A 0.3 percent increase in the first quarter was the smallest since records began in 1996.
Companies probably will keep curtailing labor costs, which account for about two-thirds of corporate expenses, even as the economy emerges from the recession. With the unemployment rate forecast to rise, employees have little room to negotiate pay and benefit increases.
“Workers in general don’t have a lot of bargaining power and businesses, in a high unemployment environment, are using less overtime and in some cases part time,” to contain costs, Stuart Hoffman, chief economist at PNC Financial Services Group, said before the report. “For those who are getting wage increases, companies are skimming them down.”
Economists forecast the index would increase 0.4 percent, according to the median of 57 projections in a Bloomberg News survey. Estimates ranged from gains of 0.2 percent to 0.7 percent.
The employment cost gauge measures the cost to companies of wages, benefits and employer-paid taxes such as Social Security and Medicare.
Wages and salaries, which account for about 70 percent of total employment costs, increased 0.4 percent, compared with a
0.4 percent rise in the second quarter. From a year earlier, these costs rose 1.5 percent, the smallest gain since 1982.
To contact the reporter on this story:
Courtney Schlisserman in Washington at +1-202-624-1943 or cschlisserma@bloomberg.net
To contact the editor responsible for this story:
Christopher Wellisz at +1-202-624-1862 or cwellisz@bloomberg.net

Mortgage Rates to Increase as Fed Exits, El-Erian Says on CNBC
2009-10-30 14:26:11.514 GMT
By Ruby Madren-Britton

Oct. 30 (Bloomberg) — Mortgage rates will rise when the Federal Reserve ends its $1.25 trillion program to purchase mortgage-backed debt, Pacific Investment Management Co.’s Mohamed El-Erian said in an interview on CNBC.
“The time has come for the Fed to exit some of this program,” said El-Erian, the chief executive and co-chief investment officer of the world’s biggest manager of bond funds.
“What’s critical for the Fed is not to try and offload all the mortgages it has bought into a market that will not be able to absorb it.”
The purchases from Fannie Mae, Freddie Mac and Ginnie Mae brought down yields on mortgage-backed securities and allowed lenders to reduce rates on new loans while still selling the securities backed by them at a profit. Mortgage rates fell to a record low of 4.78 percent in April. The average 30-year fixed mortgage rate climbed to 5.03 percent, mortgage buyer Freddie Mac of McLean, Virginia, said yesterday in a statement.
The central bank’s mortgage purchasing program is scheduled to end in the first quarter of next year, the Federal Open Market Committee said in a statement Sept. 23.
Spending by U.S. consumers fell by 0.5 percent in September for the first time in five months, according to a report released today.
“Until housing stabilizes, the consumer is not going to feel confident to go out and spend,” El-Erian said.

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