Market Recap: Will Robust Job Growth Lead to Rate Hike Next Week?
Mortgage rates were on the rise this week, ahead of next week’s Federal Open Market Committee (FOMC) meeting. After this week’s positive job numbers from the ADP employment report, many economists are predicting a rate hike will take place next week.
Consumer credit growth slowed in January to a pace of $8.8 billion, down from December’s growth of $14.8 billion. Revolving credit declined at a rate of 4.6%, the most significant decline since December 2012. Non-revolving credit increased at a rate of 5.5%, but not enough to offset revolving credit’s drop. Revolving credit has shown some volatility in recent month, but non-revolving growth has held steady.
Each week, the Mortgage Bankers Association (MBA) releases a survey of mortgage applications including new purchases, refinances, and a composite index. The MBA mortgage application survey has shown some volatility over the past few weeks, up last week and down the two weeks before that. For the week ending on 3/3, new purchase applications are up 2.0% and refinance applications are up 5.0% for a composite increase of 3.3%. As rates rise, refinance activity has been on a steady decline, reaching its lowest level since November 2008 last week.
The ADP employment report tracks changes in hiring in the private sector. In February, the ADP employment report expanded by 298,000 jobs, surpassing growth expectations of 190,000 jobs. Moody’s Analytics reports good producers are up 106,000 jobs, construction jobs are up by 66,000, and manufacturing jobs are up by 32,000. Moody’s Analytics chief economist, Mark Zandi, said, “confidence is playing a large role. Businesses are anticipating a lot of good stuff – tax cuts, less regulation. They are hiring more aggressively.”
Next week, the FOMC is scheduled to meet on Tuesday and Wednesday. Based on remarks by several Fed members, including Fed Chair Janet Yellen, the market is pricing in a rate hike.
Sources: Business Insider, CNBC, MarketWatch, Bloomberg, Mortgage News Daily