Labor Market Weighs Heavily On Fed’s Interest Rates Decision

June 16, 2016

As expected, the weak labor market report played a major roll in the Federal Reserve’s decision to keep interest rates steady. Not only did the Federal Open Market Committee decide to hold rates constant, but it also reduced its projection of future rate increases.

According to the NAHB’s Eye on Housing blog, the Fed is still signaling two rate increases for 2016, although a larger number of officials (six compared to one in March) see a strong possibility of there only being one rate hike.

After the Bureau of Labor Statistics released a labor market report for May that showed an increase of only 38,000 jobs and downward revisions to March and April’s jobs increases, the lack of a rate increase does not come as a surprise.

The residential construction sector, after a strong run of hiring, has felt the effects of the weakness in hiring recently, as well. Between April and May, a combined 9,600 net positions were lost between home builders and remodelers. This loss cut the six-month moving average of residential construction employment gains to an average of 10,000 a month, which is about the same as the average for the overall economy.

For the full report and analysis, click the link below.

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