Weekly Economic Report 11.5.18

KEY MARKET INDICATORS as of Nov 05, 2018

October 2018 Wage Growth

October Job Market Report Shows Wage Growth

The U.S. job market rebounded in October, adding 250,000 jobs. The job market is at full employment, with the overall unemployment rate unchanged at 3.7% – its lowest level since 1969. Job growth has re-accelerated this year, despite low unemployment rate. For the year to date, job growth has averaged 213,000 jobs a month, ahead of the pace in 2016 and 2017. An important data point for interest rate-sensitive sectors such as housing is wage growth. Wages grew by 3.1% in October, and wages for production workers grew by 3.2%. While faster wage growth is usually a good thing as it boosts the income of homebuyers and homeowners, it is generally a sign of labor market tightening and accelerating inflation at this point in the cycle, and will drive mortgage rates higher. Compared to 2017, wage growth has accelerated by around 30 basis points, while inflation has accelerated by 40 basis points. That means wage growth after adjusting for inflation has been flat. Higher inflation rates are already raising mortgage rates. Higher wage growth also suggests faster turnover in the job market as more workers switch jobs. Those job changes often trigger home-buying.

Job growth in October was broad based, with education and health, tourism and hospitality, professional and business services, and manufacturing all adding more than 30,000 jobs. The recent slowdown in home sales has not slowed demand for construction workers. The sector reported strong job growth, adding 30,000 jobs. Compared to a year ago, the fastest growing sectors are natural resources and mining (up by over 9% from a year ago), reflecting higher energy prices; and construction (up by nearly 5%), which has benefited from a growing housing market.

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 at 3.3%, close to the lowest level in nearly 50 years. Over the past two years, around two-thirds of the job growth has gone to individuals in this age group.

October 2018 Wage Growth

Tian Liu, Genworth Mortgage Insurance Chief Economist
tian.liu@genworth.com
919 807.9584

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Disclaimer: Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Genworth Mortgage Insurance and are subject to change without notice. Genworth Mortgage Insurance has no obligation to provide revised assessments and assumes no duty to update information in the event of changed circumstances. While we have gathered this information from sources believed to be reliable, Genworth Mortgage Insurance cannot guarantee the accuracy of the information provided. Certain data discussed in this report is publicly available only on a time delayed basis. Genworth Mortgage Insurance strives to analyze data as it becomes available, but makes no representation that all data is reviewed immediately upon release. 

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