Non-Farm Payroll Report Disapoints
Employment related reports dominated the week’s economic reports. The ADP employment report for January indicated that only 175,000 new private sector jobs were added for the lowest reading in five months.
December saw 227,000 new jobs. Severe weather conditions were the cause of lower than expected jobs growth. Month-to-month job reports can be unpredictable, but quarterly results provided positive information as the three month period ended in January 2014 saw average monthly job growth of 230,000 jobs as compared to an average reading of 220,000 jobs added during the same period a year ago.
New Jobless Claims came in at 331,000, significantly less than the prior week’s reading of 351,000 new jobless claims, and also lower than the forecast reading of 337,000 new jobless claims. Analysts said that these readings supported gradual improvement in the economy.
The Bureau of Labor Statistics (BLS) released its Non-Farm Payrolls report for January, which indicated that 113,000 new jobs were added during the first month of 2014 vs. expectations of 185k new jobs.
This reading was better than December’s reported 75,000 jobs added, and suggested to economists that bad weather was not the underlying cause of the dip in jobs growth. Healthcare and government sectors cut jobs in January.
With lower job growth, a higher unemployment rate would seem likely, but the national unemployment rate dropped to 6.60 percent from last week’s reading of 6.70 percent.
The Federal Reserve’s FOMC Committee has established a benchmark reading of 6.50 percent as one of the economic indicators it uses in decisions concerning federal stimulus programs.
Readings for labor and unemployment are important for the overall economy and housing markets; consumers worried about jobs that they might lose or jobs they cannot find likely won’t be buying homes in the near term.
Residential Construction Spending Up
Last week’s mortgage and housing-related reports began with Construction Spending for December, with a reading of 0.10 percent or a seasonally adjusted $930.5 billion. December’s reading fell short of an expected increase of 0.40 percent.
Spending for private sector projects rose by 1.00 percent; of this amount, residential construction spending increased by 2.60 percent and private sector spending for non-residential construction fell by -0.70 percent.
Although construction spending posted a fractional gain, the good news is that construction spending is currently dominated by residential construction and that due to inclement winter weather, any gain in construction spending during December could be considered positive.
What Will Impact Mortgage Rates This Week?
The focus this week will be on last weeks weaker than expected labor results and what the Fed will do if this trend continues. Tuesday new Fed Chair Janet Yeller begins testifying at the House Financial Services Committee. Many are already speculating that she will acknowledge the Fed may have to suspend or alter future tapering plans. Below is the schedule of economic releases this week.