Market Recap: Construction Spending Up, Mortgage Apps Down, ADP Employment Strong
Mortgage rates trended slightly downward this week, amidst some stock market-related uncertainty. Construction spending improved after last month’s flat numbers. Both new purchase and refinance mortgage application submissions declined. The ADP employment report showed strength.
After no change from December to January, US construction spending edged up 0.1% in February, to a seasonally adjusted annual rate of $1.27 trillion. Broken down, public construction spending dropped 2.1% and private project spending increased 0.7%. Residential spending only increased 0.1% and nonresidential spending was up 1.5%. Despite this month’s soft growth, year-over-year, total construction spending is up 3.0%. An especially long winter combined with political uncertainty over steel and aluminum tariffs has hurt construction projects lately. Home buyer demand remains strong and construction is expected to pick up to meet this unwavering demand.
The Mortgage Bankers Association (MBA) weekly mortgage application survey declined for the last week of March. New purchase applications dropped 2.0% and refinance applications fell 5.0% for a composite decrease of 3.3%. MBA chief economist Mike Fratantoni explained, “potential home buyers may be a little rattled by the swings in the stock market the past few weeks, but the job market continues to strengthen, which should power demand through the spring season.” Even after the Federal Reserve’s March interest rate hike, average mortgage rates are holding steady, hovering around the lowest levels in two months.
The ADP employment report exceeded hiring expectations in March, with the addition of 241,000 private sector jobs. March marks the fifth straight month the report has surpassed a 200,000 gain. Medium-sized firms led the charge with 127,000 new hires, followed by large firms with 67,000 and small businesses with 47,000. Although the ADP employment report is based on a limited sample of employment data, this month’s numbers are supportive of a strong labor market and exceptional job growth.
Next week, the Federal Reserve will release the minutes from its March Federal Open Market Committee (FOMC) meeting. The strong labor market is likely to be a highlight, with unemployment near a 17-year low, jobless claims on a low streak not seen since the 1970s, and the market nearing full employment. The biggest challenge faced by employers today is the ability to find skilled workers to fill open positions. The housing market is directly influenced by a strong job market, with gainfully employed consumers able to finance high-dollar purchases like homes.
Sources: Bloomberg, CNBC, CNBC, MarketWatch, Mortgage News Daily