America’s Labor Market Still Going Strong

The US Labor Department’s Jobs report for February showed the American labor market remained strong. Reflected in the report showed that 273,000 jobs were added by the US economy. The US Bureau of Labor Statistics said this was substantially more than us economists had foreseen. In fact, the numbers resulted in the largest monthly increase since May 2018 which put the unemployment rate back to the historic low of 3.5%.

Among the job gains per industry, the leading gains of new jobs were in health care and social

assistance, food services and government. Within those industries, 7,000 people were hired for the April Census.

The Institute of Supply Management supplied data showing that the US manufacturing sector has been growing the past five months. The ISM report is just another factor indicating that the US economy is in a good place.

“With global growth stabilizing in recent months and domestic economic activity also starting to pick up, the ISM survey adds to the evidence that 2020 is likely to be a better year for US manufacturers,” wrote Capital Economics’ Senior US Economist Andrew Hunter in a note.

The year leading up to the February job survey paychecks rose by 3% with a 0.3% bump in February. The month’s report in addition to better-than-expected services PMI from the Institute for Supply Management was a plus for the US economy according to Michael Hanson, SVP of research at Fisher Investments.

This is just icing on top of the January report which beat expectations. The Labor Department’s Jobs report found that the US economy added 225,000 jobs with an unemployment rate of 3.6%. Job growth was seen in the construction, health care, transportation and warehousing industries.

According to Capital Economics Chief US Economist Paul Ashworth, mild weather in January boost the construction and transportation sectors.


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The New Year Starts Off With Mortgage Rates Below Last Year’s Average

A new year has brought good news for the housing industry. The first week reported that the average U.S. fixed rate for a 30-year fixed mortgage averaged at a low 3.72%. The findings were 80 basis points below data reported a week earlier.

George Ratiu, Realtor.com’s chief economist said, “The conventional 30-year loan slid 2 basis points to 3.72% in the first week of 2020. Rates remain about 80 basis points lower than the first week of

2019.”

Ratiu predicts that employment and wage gains will fuel the housing industry. The economy will maintain a moderate growth trajectory this year.

The 15-year FRM also was at a low 3.16% which was down from this time last year’s reportings of 3.99%. The average rate dropped in just one week from 3.19% to 3.16%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage also averaged 3.46% which was lower than the 3.98% reported this time last year.

“As mortgage rates remain favorable, buyers are likely to get a head start on the spring shopping season in the first couple of months of this year,” Ratiu said. “A stronger infusion of new homes in affordable price ranges would be a welcome gift for the New Year.”

Sam Khater, Freddie Mac’s chief economist, believes the rates have maintained around 3.7% for the last couple of months because of ” the combination of improved economic data and market sentiment has led to stability in mortgage rates.”

“The low mortgage rate environment combined with the red-hot labor market is setting the stage for a continued rise in home sales and home prices,” said Sam Khater.

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End of September Seeing Lowered Rates

The year is coming to an end and we have now seen the second cut in rates in 2019. The Federal Reserve announced that there will be a reduction in the key, short-term federal funds rate by 25 basis points to a top rate of 2%. The cut stems from a set of increases enacted in 2018.

Another big move on the Fed’s part was a reduction in the interest rate it pays on bank reserves. This move came in hopes to improve the ability of the Fed to target the federal funds rate in markets.

Concerns in the future economy has the Fed’s leadership in disagreement and their hold on the interest rate it pays on bank reserves in a weaker state. Fed regional presidents, members of the FOMC, had a disagreement that was the highest number since the year 2014. Three of the Fed regional presidents voted no for the change in in the rate. Two opposing it altogether and one urging a 50 basis point reduction.

Even with a few concerns the Fed’s still believe the labor market is strong and the economy is still rising at a “moderate” rate. This fares the same in the home building industry. Household spending is still going strong.

The action of reversing the high cycles of 2018 has been a positive in the decline in rates this year. This has been a net positive for what the future holds for the housing demand and home construction. This comes off the 10-year low for housing affordability that occurred last Fall.

The National Home Builders Association forecast there will be another cut before year end.

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