Last week we received reports detailing private and public construction spending, employment data and the beige book report, all of which will sway the Fed on any move to raise interest rates in September.
We finally are seeing real gains in construction spending and the sector could finally be taking it rightful place that moves our economy. Construction spending for July met growth expectations of 0.70 percent as compared to June’s reading of 0.10 percent. The Commerce Department reported that this reading translated to a seasonally adjusted annual rate of $1.98 trillion, which was the highest rate of spending since May 2008.
Residential construction spending was up 10.80 percent year-over-year in July, with both single-family and multifamily construction posting double digit gains.
The Federal Reserve issued its Beige Book report last Wednesday, which indicated that wage pressures in many of the 13 Fed districts could cause rising inflation, which the Fed has cited as a component in any decision to raise the federal funds rate. The Fed has set a benchmark of 2.0 percent inflation as an indication tor raising rates, but doesn’t expect to see this reading in the short term, and inflation is currently coming in at 1.3 percent.
Freddie Mac reported that average mortgage rates rose across the board last week. The rate for a 30-year fixed rate mortgage rose by five basis points to 3.89 percent. The rate for a 15-year fixed rate mortgage was higher by three basis points. While, the rate for a 5/1 adjustable rate mortgage rose by three basis points to 2.93 percent. Average discount points were unchanged at 0.60 for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.
Weekly jobless claims rose to 282,000 new claims against last week’s reading of 270,000 new claims and expectations of 275,000 new jobless claims. While this was the highest reading for new jobless claims in since late June, the reading for new weekly jobless claims has remained below the 300,000 benchmark for the last six months.
The four-week rolling average of new jobless claims rose by 3250 new claims to an average of 275,500 new claims. Analysts said that layoffs are declining and that workers who lose their jobs are finding new employment quickly.
Continuing jobless claims fell by 9000 to a reading of 2.26 million for the week that ended August 22.
Private sector payrolls increased by 190,000 jobs in August as compared to July’s reading of 170,000 jobs according to ADP. This supports the trend of stronger hiring seen by economists in recent weeks. The government reported that Non-farm payrolls, which include public and private sector jobs, fell to 173,000 jobs against July’s reading of 245,000 jobs.
The Commerce Department reported the national unemployment rate dipped to 5.10 percent in August against expected reading of 5.20 percent and July’s reading of 5.30 percent. However, the participation rate dropped to a dismal 62.6 percent.
What’s Ahead for the Week?
This week we’ll get reports on job openings, the usual weekly reports on new jobless claims, FHLMC mortgage rate survey and Consumer Sentiment.
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