Week in preview: Government shutdown and jobs report ahead?

Market Realist

Realist real estate roundup, September 23–27 (Part 6 of 7)

(Continued from Part 5)

Next week is all about the shutdown and the jobs report

On Tuesday, we’ll see if the government continues to operate or not. If we don’t get a deal, we won’t have any government economic releases, which means the jobs report may not happen. Assuming we do get a deal and the government remains open, next week will be all about Friday’s jobs report. A strong report would put October tapering on the table. A weak report would probably prevent it. If we do have a government shutdown, October tapering would probably be off the table as well.

Economic data this week

Monday, September 30

  • ISM Milwaukee
  • Chicago Purchasing Manager
  • Dallas Fed Manufacturing Activity

Tuesday, October 1

  • Markit PMI
  • Construction Spending
  • ISM Manufacturing
  • ISM Prices Paid
  • Vehicle sales

Wednesday, October 2

  • MBA Mortgage Applications
  • ADP Employment Change
  • ISM New York

Thursday, October 3

  • Initial jobless claims
  • Bloomberg Consumer Comfort
  • Challenger Job Cuts
  • RBC Consumer Outlook
  • Factory orders
  • ISM Non-Manufacturing

Friday, October 4

  • Nonfarm payrolls
  • Unemployment rate
  • Hourly earnings

Real estate earnings this week

No real estate-related earnings this week.

Implications for REITs

For the mortgage REIT sector, the jobs report will be the most important. The agency REITs like Annaly (NLY) and American Capital (AGNC) will trade off of the possibility that market support for mortgage-backed securities will change. While the government shutdown won’t directly affect them (since principal and interest will still be paid on Ginnie Mae securities), those with origination arms like PennyMac (PMT) may find their origination business hurt as many of the documents bankers need from HUD and the IRS won’t be sent out. This could halt their pipelines.

Implications for homebuilders

The builders will focus on the construction spending numbers as well as the jobs report. Consumer sentiment (closely related to the jobs market) is a big driver of business for builders like Lennar (LEN) and KB Home (KBH), both of whom reported third quarter earnings last week. The Challenger Job Cuts is another number that affects sentiment, which is worth watching. We’ve seen a lot of announced job cuts coming out of the banks, as the refinance wave appears to be over.

Continue to Part 7

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