The construction spending report for June showed only a 0.1% gain, largely affected by the unexpected decline in single-family homes. Spending on single-family homes dropped 0.3%, after gains in May and April. Nevertheless, year-on-year single-family construction spending displayed an increase of 12.8%. Multi-family units showed much greater strength in June, up 2.8% for the month, and up 23.7% year-on-year.
Consumer spending continued to rise throughout the month of June, with a gain of 0.2%, but failed to compare to the 0.7% spike in consumer spending seen in May. Moving into July, Americans’ self-reported spending averaged $91 for the month, similar to the last few months. This number, although slightly lower than the July 2014 average, is higher than every other July average since 2009.
Employment reports have been abundant over the past week, starting with Gallup’s U.S. Job Creation Index for July, which maintained a record high of plus 32 for the third straight month. This score was a result of 43% of workers saying their employer is hiring new workers and expanding its workforce size, and 11% of workers who said their employer is letting workers go and reducing its workforce size, percentages that remained the same as in June.
On the flip-side is the Job-Cut report by Challenger, which reported a sizeable 105,696 layoff count in July. The number of layoffs for the month was majorly affected by an announcement by the Army that it is cutting 57,000 jobs over the next 2 years. Computer & electronics also reported heavy layoffs, at 18,891, contributing to the outsized July layoff count.
Despite the reported layoffs, jobless claims remain remarkably low. Initial claims for the week of August 1 came in at 270,000, and the 4-week average dropped 6,500 in the week to 268,250, more than 10,000 below the month-ago trend. Continuing claims for the July 25 week declined by 14,000 to 2.255 million, and the 4-week average did the same, dropping 18,000 to 2.239 million. Both initial and continuing jobless claims continue to report numbers at or near historic lows.
Payroll numbers, while not amazing, are solid enough to keep the possibility of a September rate hike alive. Non-farm payrolls rose 215,000 in the month of July, as was expected. Within non-farm payrolls, trade & transportation payrolls rose 60,000, professional & business service rose 40,000, retail jobs rose 36,000, and manufacturing, which is usually weak, rose 15,000 in July. In other employment news, wages are up 0.2% for the month of July, with a year-on-year rate of 2.1%. The labor force participation rate, which showed a sharp drop in June, held at 62.6% in July, and the unemployment rate remains unchanged at 5.3%.
Mortgage Rates for most loan programs have remained unchanged over the past 2 weeks. Compared to the week of July 22, the 30-year fixed, high balance, FHA, FHA 203k, VA and USDA loan programs have shown little-to-no change. The 30-year fixed continues to hover around 4.000% (4.040% APR), averaging approximately 1/8 percentage points lower than this time last year. Among the remaining loan programs, the 15-year fixed and Manufactured FHA programs displayed very slight increases, and the Manufactured Conventional and Jumbo programs dropped 22.2 basis points and 11.5 basis points, respectively.
Stability in rates has helped to boost mortgage activity recently as well. Home purchase applications increased by 3.0% in the week of July 31, and are 23% higher compared to this time last year. Refinancing applications have also shown growth, up 6.0% in the last week of July.
Freddie Mac’s weekly mortgage rate survey reported that the national average rate for 30-year fixed mortgages dropped below 4.000% over the last couple of weeks. Freddie Mac chief economist Sean Becketti commented on the drop in rates, noting that “uncertainty about the economy helped drive down Treasury yields early in the week, and thus mortgage rates fell 7 basis points to 3.91 percent, the lowest level since June 4th.”
Stop by one of our 3 SLO County locations, or call 805.543.5626 to get started on your home purchase or refinance today!