You only have to read these predictions to understand the importance of this week’s employment report — Two Federal Reserve estimates of U.S. economic growth are predicting that gross domestic product will hardly expand in the fourth quarter. The Atlanta Fed’s GDPNow estimated that growth is likely to come in at just 0.3%, down from their 1.0 percent forecast on November 8th. Meanwhile, the New York Fed’s GDP Nowcast estimates GDP growth of 0.4%.
Economic growth for 2018 and the first quarter of 2019 averaged 3.1%, a pretty solid number. In the past six months the average has dropped to 2.0%. We will call this steady growth. However, a move below 1.0% would put us in a slow growth mode. Thus, November’s employment numbers are being watched closely in order to ascertain whether these predictions are on the mark, or perhaps instead we are continuing in our pattern of steady growth. An increase of 266,000 jobs in November definitely provides evidence of the economy holding its own.
The fact that the jobs numbers from the previous two months were revised upward by over 40,000 also is important to this analysis. The headline unemployment number came in at 3.5% and wage growth was slightly higher at 3.1% for the year. You can be sure that the members of the Federal Reserve are also watching these numbers. The Fed meets this week with most analysts expecting no movement on interest rates. Had the employment data surprised on the weaker side, perhaps there would have been a case for the Fed to make a move. However, these numbers almost guarantee that the Fed will be comfortable staying on the sidelines.
Dave Hershman is the top author in the mortgage industry. Dave has published seven books, as well as hundreds of articles and is the founder of the OriginationPro Marketing System and Mortgage School. Want to send this commentary and other news in a personalized format to your sphere database or on social media? Sign up for a free trial at www.OriginationPro.com.