Weekly Economic Report

Weekly Economic Report 4.10.2018

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KEY MARKET INDICATORS as of Apr 10, 2018

March Jobs Report

The U.S. job market added 103,000 jobs in March, a slower pace of job growth that is most likely the result of an abnormally strong February.For the first quarter, the job market added an average of 202,000 jobs per month – a very strong performance given that the the job market is at full employment, with the overall unemployment rate remaining unchanged at 4.1%. An important data point for interest rate-sensitive
sectors such as housing has been wage growth. Wages grew by 2.7% in March. In the first quarter, wage growth has accelerated by about 20 basis points (or 0.2 of 1 percent) to 2.7%. That is good news for workers, but it also triggered a quarter-over-quarter increase in mortgage rates of around 30 basis points. At this point in the cycle, faster income growth is generally a sign of labor market tightening and accelerating
inflation. And the increase in mortgage rates would overwhelm the wage growth and make housing less affordable to potential buyers. While deteriorating affordability is a concern, demographics and the strong job growth are stronger drivers for the housing market and remain very positive.

Professional and business services, education and health, and manufacturing reported the most monthly job gains in March. The construction sector, which has benefited from the ongoing housing recovery, showed unusual weakness which is expected to be one-off. Consumer sectors such as retail, restaurant, and tourism also reverted recent trends. We still expect these sectors to perform well for the rest of the year, benefiting from the boost to after-tax income under the new tax law. Manufacturing is the one of the few sectors to continue the recent trend of stronger job growth. It has benefited from both a weaker U.S. dollar and less regulation under the Trump administration.

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 lower than the trough in 2006-07, and approaching the lowest level since the late-90s and early-2000s.

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