Weekly Review
Newsletter - 09/06/2022
Week of August 29, 2022 in Review
Important labor sector reports made headlines ahead of the Labor Day holiday, while home prices continue to rise. Don’t miss these key stories:
- Young Americans Dominate August’s Jobs Report
- Private Payrolls Show a Slowing Trend
- Initial Jobless Claims Moderate in Recent Weeks
- Home Prices Continue to Rise, Albeit at a Slower Pace
Young Americans Dominate August’s Jobs Report
The Bureau of Labor Statistics (BLS) reported that there were 315,000 jobs created in August, coming in just above expectations of 300,000 new jobs. However, there were negative revisions to the data for June and July that subtracted 107,000 jobs in those months combined. The Unemployment Rate rose from 3.5% to 3.7%, though this is partially due to the rise in the labor force, which increased by 786,000.
What’s the bottom line? There are two reports within the Jobs Report. The Business Survey is where the headline job number comes from, and it's based predominately on modeling. The Household Survey is done by actual phone calls to 60,000 homes. It also has a job loss or creation component, showing 442,000 job creations.
While this seems strong, 82% or 363,000 of those jobs were among people 16 to 19 years old. Meaning most of these jobs represent entry-level positions and don’t typically reflect sizable incomes that lead to big economic spending.
Private Payrolls Show a Slowing Trend
The ADP Employment Report, which measures private sector payrolls, showed that there were only 132,000 jobs created in August. This was about half of the amount expected and down from 268,000 new jobs in July and 380,000 in June.
What’s the bottom line? The data released last week for June, July and August clearly show that the jobs market is slowing. Nela Richardson, chief economist for ADP, said, “Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy's conflicting signals.”
Initial Jobless Claims Moderate in Recent Weeks
Initial Jobless Claims decreased by 5,000 in the latest week, as 232,000 people filed for unemployment benefits for the first time. The previous week’s Initial Jobless Claims were also revised lower by 6,000. Continuing Claims, which measure people who continue to receive benefits after their initial claim is filed, increased by 26,000 to 1.438 million, the highest level since April.
What’s the bottom line? The 4-week average of Initial Jobless Claims had been rising steadily this spring and summer after reaching 172,000 on April 2. That being said, this report can be the “canary in the coal mine” to show that the job market is starting to soften, though it is a lagging indicator.
Home Prices Continue to Rise, Albeit at a Slower Pace
The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices rose 0.6% in June and 18% year over year. This annual reading is a decline from the 19.9% gain reported in May but still strong.
The Federal Housing Finance Agency (FHFA) also released their House Price Index. Single-family homes with conforming loan amounts rose 0.1% in June and 16.2% year over year. This is a decline from the 18.3% increase reported in May, but again still very hot on an annual basis.
What’s the bottom line? “Prices are clearly increasing at a slower rate,” said Craig Lazzara, Managing Director at S&P Dow Jones Indices. “It’s important to bear in mind that deceleration and decline are two entirely different things and that prices are still rising at a robust clip. June’s growth rates for all three composites are at or above the 95th percentile of historical experience.”
What to Look for This Week
After the market closures Monday for Labor Day, the economic calendar is relatively quiet for the week ahead. Jobless Claims remain crucial to monitor when they are released on Thursday because the Fed will be watching employment data closely as they determine how to best fight inflation.
Technical Picture
Mortgage Bonds moved sharply higher off of support at 99.0 following Friday’s BLS Jobs Report. The 10-year has fallen below the pivotal 3.25% level and ended last week trading at around 3.20%.
Information (weekly review) was provided by Mark Hedman
Homebridge Financial Services - Sales Manager, Mortgage Loan Originator
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