Market Forecast: FOMC Meeting, Construction Spending, and ADP Employment
Mortgage rates trended upward last week, after hitting year-long lows earlier in the month. This week, the Federal Open Market Committee (FOMC) will meet for the third time this year. There is not a press conference scheduled after this meeting, but there will be an official announcement released on Wednesday at 2 PM. Also scheduled for release this week, are the US construction spending report and the ADP employment report.
The FOMC is scheduled to meet on Tuesday and Wednesday, for the third time in 2017. At the December 2016 meeting, the FOMC voted to raise the benchmark interest rate and projected three rate hikes for 2017. The most recent rate hike took place during the March meeting. According to a Reuters report from last week, futures traders are pricing in a 71% chance of a June rate hike.
In February, construction spending increased by 0.8%, driven by gains in residential spending. Last month housing starts decreased, but building permits issued increased. New home sales also soared beyond predictions at a rate of 621,000. The construction industry has faced difficulties with hiring laborers.
The ADP employment report tracks the addition of private sector jobs based on approximately 400,000 businesses who use the ADP payroll service. In March, the ADP employment report showed the addition of 263,000 jobs. The FOMC reviews reports like this to determine the strength of the job market and vote on interest rate policy.
The FOMC is expected to raise rates two additional times this year to fulfill the December 2016 prediction of three rate hikes in 2017. The FOMC uses reports like construction spending and the ADP employment report to determine the strength of the labor market and housing economy.
Sources: Mortgage News Daily, Reuters, Market Watch, Bloomberg