Weekly Economic Review: U.S. Wages Growing at Fastest Rate Since 2009

Posted by Laine Smith on 2/4/18 9:30 AM

Topics: Economy

In this week’s economic review, the 30-year average mortgage rate continued to climb, the employment report posted gains, and the Federal Reserve left its benchmark interest rate as-is.

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Consumer Confidence

Consumer confidence moved upward in January, posting a level of 125.4 from December’s upwardly revised 123.1. Not far from November’s 17-year high of 128.6, the report’s strength was centered in expectations, up almost 5 points to 105.5.  

Home Prices

Prices are rising strongly, according to the S&P Corelogic Case-Shiller Home Price Index. The 20-city adjusted index increased 0.7 percent in November, putting the year-over-year index at a sizable plus 6.4 percent.

Pending Home Sales

Despite limited home supply, existing home sales managed to pick up a 0.5 percent gain from November to December. By region, the South is the furthest ahead in resales with a 2.6 percent monthly gain.

Employment

The January employment report was a big positive with the U.S. adding 200,000 jobs to the economy versus an estimated 180,000. Unemployment remained low at 4.1 percent.

Wage gains stole the spotlight with average hourly earnings up 0.3 percent. The gain boosted the year-over-year average hourly earnings component to plus 2.9 percent, the best of the recovery.

A hint of weakness was seen in the average workweek, which dropped to 34.3 hours for private-sector employees. Manufacturing hours also posted a decline, down 0.3 percent.

The Fed

As expected, the Federal Reserve did not move on rates at their January meeting, but outgoing Fed Chair Janet Yellen said in a post-meeting statement that the “economy is growing at a healthy, solid pace” and if current economic conditions continue the process of gradual rate increases “is likely to continue.”

This week in the economy:

  • As of February 1st, the 30-year average fixed rate jumped 7 basis points to 4.22 percent with 0.5 points, according to Freddie Mac.
  • In the week of January 26th, mortgage activity was held back by rising mortgage rates. Both purchase and refinance applications declined by 3 percent with the refinance share of mortgage activity dropping to 47.8 percent, the smallest share since August 2017.
  • In the week of January 27th, initial jobless claims fell 1,000 after weeks of volatility. Initial claims totaled 230,000 with the 4-week average down for the third week in a row to a level of 234,500.
  • The final reading of January’s Consumer Sentiment report shot up to a level of 95.7. This puts the index up 1.3 points from the preliminary reading.

The economic calendar for the week of February 5th, 2018:

  • Tuesday – JOLTS
  • Wednesday – MBA Mortgage Applications, Consumer Credit
  • Thursday – Jobless Claims, Bloomberg Consumer Comfort Index

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