This week, the Federal Open Market Committee [1] will release the minutes of its last meeting. During the committee’s October 4 meeting, it was announced that the Board of Governors of the Federal Reserve System voted unanimously to lower the interest rate paid on required and excess reserve balances to 1.55 percent, effective October 31, 2019. The FOMC cited strong labor, as employment rose by 128,000 in October according to the latest Employment Situation Summary.
Fannie Mae Chief Economist Doug Duncan notes that this number accounts for net losses of 42,000 for motor vehicles and parts manufacturing, and what this means for the Fed’s rate decision.
“The average workweek held steady, and average hourly earnings growth was unchanged at 3.0% year over year, which should offset concerns of weakening personal income growth,” Duncan said. “In the household survey, the unemployment rate ticked up one-tenth this month but remains at historically low levels, and labor force participation increased as well, indicating workers are continuing to return from the sidelines. Based on this report, the Fed should be comfortable with its tone at the recent FOMC meeting in which it implied a more muted appetite for future rate cuts.”
With the increased number of jobs comes an increased volume of residential construction workers, notes First American Deputy Chief Economist Odeta Kushi. The solid jobs report is a good reflection of strength in the housing market.
“More hammers means more homes, so October’s month-over-month gain of 2,900 residential construction jobs signals an increase in new home construction may be on the horizon, which would benefit home buyers and the housing market,” Kushi said in a statement. “Since the recession, housing starts per construction worker (construction productivity) has improved, but seems to have settled just above 1.4 housing starts per worker. The rise in construction jobs is good news for the housing market, as finding ways to increase the productivity of construction workers is critically important to alleviating the labor shortage challenge and the gap between household formation and home building.”
Here’s what else is happening in The Week Ahead:
NAHB/Wells Fargo Housing Market Index (November 18)
Housing Starts Report (November 19)
Banking, Housing, and Urban Affairs Hearing (November 20)
NAR Existing Home Sales Report (November 21)