Employment, Services Rise with Higher Mortgage Applications
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Three separate reports indicate that U.S. income and spending in the consumer services and financial sector are on the rise, helping job growth and business income.
The Institute for Supply Management reported Wednesday that the non-manufacturing sector rose more than expected, with activity as measured by the Non-Manufacturing index up to 56.7 in January, 0.2 points higher than December’s reading and slightly above forecasts.
Three separate reports indicate that U.S. income and spending in the consumer services and financial sector are on the rise, helping job growth and business income.
The Institute for Supply Management reported Wednesday that the non-manufacturing sector rose more than expected, with activity as measured by the Non-Manufacturing index up to 56.7 in January, 0.2 points higher than December’s reading and slightly above forecasts.
The report noted that various sectors shared an optimistic outlook, with more businesses expecting strong business activity in the future. “Eight non-manufacturing industries reported growth in January. Comments from respondents vary by industry and company, however, they are mostly positive and/or reflect stability about business conditions,” the report noted.
The biggest growth was in business activity and production, up 2.9 percentage points, while prices and employment dropped the most, at 4.3 points and 4.1 points, respectively. The report noted that six industries saw higher employment, versus seven that saw employment drop. Employment is rising in accommodation and food services, management companies and support services, wholesale trade, finance and insurance, public administration, and transportation and warehousing.
Private Employment Gains
In a separate report, payroll services firm ADP reported that the private sector added 213,000 jobs in in January, slightly below expectations of 220,000. The service industry saw the biggest growth, with 183,000 new jobs in January, although that is lower than the 207,000 jobs number in December.
Economists see the payroll data as an indicator that business confidence is improving, although the rate of growth may be moderating slightly. “Employment posted another solid gain in January, although the pace of growth is slower than in recent months.
Going the other way, the energy industry is scaling back payrolls in reaction to the collapse in oil prices. Industries benefiting from lower oil prices have been slower to increase their hiring. “All indications are that the job market will continue to improve in 2015,” said Mark Zandi, Chief Economist of Moody’s Analytics.
Mortgage Demand Rises
Growing employment is helping boost demand for financial services. New underwriting requirements are boosting the number of mortgages. Demand for home loans rose considerably in the latest week, according to a new report by the Mortgage Bankers Association, who said FHA refinance applications rose 76.5% after Barack Obama announced a reduction in mortgage insurance premiums for qualifying homeowners. FHA purchase applications rose 12.4% on a week-over-week basis.
The MBA noted that 30-year fixed-rate mortgages fell to 3.79%, the lowest level in nearly two years. However, the spread between U.S. Treasury rates and mortgage rates widened, thanks to a faster decline in U.S. Treasury rates, mainly on deflation fears. The 10-year Treasury fell to less than 1.7% in January, and some economists expect it to fall further.
The widening spread may shrink in the near term, however, as competition for more home financing activity causes mortgage rates at main street banks to fall.
