Fed Has Green Light
February brought the economy an impressive 313,000 jobs and 4.1 percent unemployment, with average hourly wages up four cents to $26.75. Construction jobs, notably, rose by 61,000.
“[These] employment numbers strengthen the view that the U.S. economy is still on a strong growth trajectory,” said Gad Levanon, chief economist for North America at The Conference Board, which assesses consumer confidence. “These numbers also make it clear that employment growth did significantly accelerate in response to the improvement in the overall economy during 2017.”
The figures, announced on Friday by the Labor Department, give the go-ahead to the Federal Reserve to raise rates; the Fed is gathering later this month to vote. According to Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), February’s gains all but guarantee a hike.
“The strong job growth assures at least three interest rates hikes by the Federal Reserve in 2018,” said Yun in a statement. “Because of the low unemployment rate, further normalization in monetary policy should be expected in 2019 as well, meaning another three or four rate hikes next year.”
Although mortgage rates are more moved by Treasury yields, a Fed increase can influence the cost of a loan, including mortgages. Mortgage rates have soared since the start of the year, with the average, 30-year fixed rate on track toward 4.5 percent.
“That in itself hurts housing affordability—but factors that can help with affordability are more income to households (possibly a second income-earner getting a job) and if home prices can finally moderate,” Yun said. “For slower home price growth, more home construction is needed. Job openings in the construction industry remain at historic highs. It is now a matter of providing necessary skills to go into the industry.”
Builders are confident in their prospects this year, but are being challenged by a lack of labor, according to the National Association of Home Builders (NAHB).