Posted On August 06, 2018
The Federal Open Market Committee (FOMC) voted to leave the benchmark interest rate unchanged and mortgage rates did not move much following the news. This week, the Labor Department will release its Job Openings and Labor Turnover Survey (JOLTS). Consumer credit is also on the schedule. The only significant housing report will be the Mortgage Bankers Association (MBA) weekly mortgage application survey.
The JOLTS report tracks monthly changes in job openings, hirings, and voluntary quits. In a strong labor market, employees are confident that if they quit their job they will find comparable employment. In May, voluntary quits reached a 17-year high, rising to a level of 3.3 million. There were approximately 6.6 million job openings, down from the previous month’s 6.8 million as hiring picks up. Despite the tightened labor market, wage inflation has yet to pick up.
Consumer credit counts the total amount of outstanding consumer debt segmented by revolving and nonrevolving debt. Revolving debt includes regular monthly bills like credit card payments whereas nonrevolving debt consists of longer term debt like student loans and car loans but excludes mortgage debt. In May, consumer credit expanded at the highest rate in six months, to a total of $24.6 billion. Revolving credit was up $9.8 billion month-over-month and nonrevolving credit was up $14.8 billion month-over-month. This expansion in consumer credit reflects the substantial second quarter Gross Domestic Product (GDP) growth which is driven by consumer spending.
The weekly mortgage application survey shows week to week changes in new purchase and refinance mortgage application submissions. For the week ending 7/27, new purchase applications decreased 3.0% and refinance applications decreased 2.0% for a composite decrease of 2.6%. MBA vice president of economic and industry forecasting, Joel Kan said the numbers were reflective of other recent housing data, stating, “application activity remained slow, which is in line with weak trends in other housing indicators such as home sales and housing starts.”
The labor market and consumer spending both trigger housing market activity. A strong labor market will typically translate into more consumer spending and financing high-cost purchases like homes. The unemployment rate is near a two decade low and jobless claims are on the lowest streak not seen since the 1970s. Although mortgage rates have inched up this year, they are still historically low.