Construction spending is on the rise, at plus 0.7% in the month of July, and plus 13.7% year-on-year. Single-family home construction strength led the way with a 2.1% gain, an improvement from the 0.5% gain in June, and an impressive 15.8% gain year-on-year. Multi-family home construction has been more volatile, falling by 2.2% in July following a 5.5% spike in June. Year-on-year, however, multi-family construction spending is still up 21.2%.
Much of the past week was focused on August employment reports, beginning with Gallup’s US Job Creation Index, which remained unchanged at 32 for the 4th straight month. This is the best index level in the 7-year history of Gallup’s report, and suggests that hiring activity is strong and has not been disturbed by the volatility in global markets. To break down the survey results for August, 44% of employed Americans surveyed reported that their employer was hiring, 12% reported that their employer was letting people go, and 39% said that their employer was not changing the size of the workforce.
Opposite of job creation is the Challenger Job-Cut Report, which told that layoff announcements were at a moderate level of 41,186 in August, a number that is far lower than that of July. Layoffs were led by the retail sector, affected by the job losses that resulted from the bankruptcy of the A&P supermarket chain.
In other employment news for the month of August, the unemployment rate dropped 2-tenths to 5.1%, which is below the low-end estimate, and is the lowest level of the recovery since April 2008. Wages are showing more strength with hourly earnings up 0.3% in the month for a 2.2% year-on-year rate. The labor participation rate remains low, and is unchanged at 62.6%. Lastly, the average workweek rose slightly from 34.5 hours in July to 34.6 hours in August.
Loan Program News
On October 1, 2015, the United States Department of Agriculture (USDA) will increase its Upfront Guarantee Fee from 2.00% to 2.75% of the loan amount on all no-down payment mortgages. This fee increase will be effective with Conditional Commitments issued on or after October 1 of this year for Single Family Housing Guaranteed Loan Program loans. It is effective for loans in fiscal year 2016, which begins October 1, 2015 and ends at the close of business on September 30, 2016. Although the upfront guaranteed fee will increase, the annual fee of 0.5% will remain the same. (click HERE to read more)
Mortgage rate in all loan programs displayed slight increases in the past week, with the exception of the 30-year Jumbo loan, which dropped 11.2 basis points, and the manufactured conventional, which remained unchanged. The 30-year fixed rose 1.6 basis points in the week to 3.875% (3.931% APR), and is still about ¼ percentage points lower than the year-ago rate of 4.125% (4.150% APR).
Global volatility in China may still be causing some back-and-forth movement in mortgage rates week-by-week. Sean Becketti, chief economist for Freddie Mac, commented on the volatility and the possibility of a rate increase by the Fed:
“The Fed took great pains at the Jackson Hole conference to keep all their options open and to avoid making too much — or too little — of the situation in China and the volatility in global equity markets. This Friday’s employment report is the last piece of significant, solid evidence the FOMC will have to consider before their September decision. The Street appears to be calling it a coin flip. There won’t be a clear direction for mortgage rates until the Fed makes its September decision, at the earliest.”
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