Tuesday, August 11, 2015

Chicago's Mortgage Choice - August 11, 2015 Real Estate Report - The Fed and Employment Data

The Federal Reserve's Open Market Committee met at the end of July. While they did not give a date to raise interest rates, they sounded optimistic that things were improving -- "The labor market continued to improve, with solid job gains and declining unemployment," the Fed statement said. And they are getting the markets ready with statements such as these: "The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market." Thus the importance of last Friday's employment data. There are only two reporting months for jobs between now and the next meeting of the Fed. Friday was one of these dates. What did it show? A solid gain of 215,000 jobs and a steady unemployment rate of 5.3%. Meanwhile, the labor participation rate remains stuck at a 62.6%, the lowest since the 1970's, and wages grew 0.2% last month, consistent with the growth of the past year. This data definitely tells us that, while we are creating jobs, we still have a long way to go with regard to wage growth and job market participation. The report brings the Fed closer to raising rates, but does not make an increase in rates in September a certainty. We must emphasize again that the Fed raising short-term interest rates does not necessarily mean that rates will skyrocket tomorrow. On the other hand, it will tell us that our era of record low rates is likely over and those who are looking for a better time to finance a major purchase such as a car or a home had better get moving. Keith Stewart 773-529-7000

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