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Job Numbers Reflect Cooling Economy, Construction Spending Rises, Mortgage Rates Edge Lower

Job Numbers Reflect Cooling Economy, Construction Spending Rises, Mortgage Rates Edge Lower

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Job Numbers Reflect Cooling Economy

Slowing job growth in August provided the latest sign of a slowdown in the past year’s rapid pace of hiring in many industries and could affect Federal Reserve strategy on interest rates.

Analysts at Oxford Economics said the Labor Department’s August report, showing the U.S. added 187,000 non-farm jobs while the unemployment rose to 3.8% from 3.5% in the prior month, “gives the Fed plenty of room” to make little or no change to interest rates at its next meeting scheduled for Sept. 19-20. The Fed has hiked its key lending rate 11 times since March 2022 to cool the economy and reduce inflation.

“The trend in job growth continued to slow, the unemployment rate rose, labor force participation increased, and earnings growth decelerated, all signs that a better balance between the supply and demand for labor continues to evolve,” Nancy Vanden Houten, lead U.S. economist at Oxford Economics, said in a statement Sept. 1.

Government data showed the unemployment rate remained low by historical standards, and several industries posted healthy job gains in August. Those included healthcare at 71,000, leisure and hospitality at 40,000, social assistance at 26,000 and construction at 22,000.

Others didn’t fare as well, with transportation and warehousing losing 34,000 jobs. Analysts said that was based on factors including slowing consumer demand for some items and recent events including the shutdown of trucking giant Yellow Corp., which laid off all 30,000 workers and is in the process of selling off distribution facilities.

Another industry that saw significant job losses in August was film and television production, especially in media capitals like Los Angeles and New York. The government said that industry, a big user of office and soundstage real estate, shed 17,000 jobs nationally as writer and actor strikes forced production shutdowns.

Construction Spending Rises

July’s U.S. construction spending increased 0.7% from the prior month and topped the year-earlier figure by 5.5%, fueled by a rise in new home construction as manufacturing-related projects tailed off after several months of growth, the Commerce Department reported.

Data showed a seasonally adjusted total of more than $1.9 trillion was spent on private and public construction projects in July. Private projects were led by monthly growth of 1.4% for residential construction, as non-residential spending increased 0.5%.

Michael Pearce, lead U.S. economist at Oxford Economics, said July trends showed residential project spending stabilizing after a year of declines, especially on the single-family side. Government numbers showed single-family construction spending rising 2.8% for the month, but still down 15.2% from year-earlier levels. Multifamily project spending increased just 0.2% for the month but rose 24.6% from July 2022.

Pearce said there were also signs that a months-long boom in factory construction, fueled in part by rising domestic production of items such as electric vehicles and computer chips, is now leveling off but should be sustained for the next few years.

Manufacturing construction spending rose 1.1% for the month but was up 70.8% from a year earlier. Other categories showing big annual spending increases included lodging at 19%, healthcare at 10.9% and education at 10.3%.

Mortgage Rates Edge Lower

Mortgage rates declined slightly after nearly a month of increases but remained high by historical standards, according to the latest weekly lender survey by Freddie Mac.

The government-backed lending agency said 30-year, fixed-rate mortgages averaged 7.18% for the week that ended Aug. 31, down from the prior week’s 7.23% and higher than the 5.66% average in the comparable week of 2022. The average for 15-year, fixed-rate loans was 6.55%, unchanged from the previous week but higher than the year-earlier average of 4.98%

Freddie Mac, the Mortgage Bankers Association and other trade groups and analysts reported average rates on 30-year mortgages hit levels during the past two weeks that have not been seen in more than 20 years.

“Mortgage rates leveled off this week but remain elevated,” Freddie Mac Chief Economist Sam Khater said in a statement on Aug. 31. “Recent volatility makes it difficult to forecast where rates will go next, but we should have a better gauge in September as the Federal Reserve determines their next steps regarding interest rate hikes.”

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