KEY MARKET INDICATORS as of Sept 10, 2018
August Jobs Report
The U.S. economy continued to perform well in August, adding 201,000 jobs. The job market is at full employment, with the overall unemployment rate stabilizing at 3.9% since April. The tax cut helped to boost job growth in 2018, with the economy adding an average of 207,000 jobs a month for the year to date, ahead of the pace in 2016 and 2017.
An important data point for interest rate-sensitive sectors such as housing will be wage growth. While faster wage growth is usually a good thing, it is generally a sign of labor market tightening and accelerating inflation at this point in the cycle, and will drive mortgage rates higher. Wage growth and inflation will be two data points that the market and the Fed will focus on in 2018 and beyond. Wage growth accelerated to 2.9% in August, ahead of market expectations. This could be a concern for the Fed and the market.
Job growth in August was broad-based. Professional and business services reported strong job growth, suggesting that businesses are doing well. The construction sector, which has benefited from the ongoing housing recovery also continued to report strong job growth. In fact, it has the highest growth rate this year outside mining.
The job market is providing a favorable economic environment for potential first-time homebuyers. Unemployment rates for people in the primary homebuying age (25-34 and 35-44) are now approaching the lowest level since the late-90s and early-2000s. The unemployment rate for 25-34 year olds was 4.1% in August, and the unemployment rate for 35-44 year olds was 2.9%.