Week of August 2–August 6, 2010

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Weekly Economic ForecastIndicator This Week Last Week

GDP 2010 Q3: 2.4% 2.5% ↓

GDP 2010 Q4: 2.6% 2.7% ↓

GDP 2011 Q1: 2.3% 2.3% ↔

Unemployment rate by the year-end 2010:

10% 9.9% ↑

Average 30-year fixed mortgage rate by the year-end 2010:

5.0% 5.0% ↔

NAR's monthly official forecast as of August 3rd

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Monday, 08/02/10

•The manufacturing sector continues to grow, with improvements in inventories, exports, supplier deliveries and employment. The ISM Manufacturing index posted the 12th consecutive month of growth.•The ISM index in July was 55.5. An index reading of 50 or higher implies an expansion in the manufacturing sector. July’s reading is a slight decline from the 56.2 figure in the prior month. But the reading implies continued expansion in the manufacturing industry. The employment index was 58.6, the eighth consecutive monthly advance.

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Monday, 08/02/10 (Cont’d)•Construction spending posted a slight increase in June due to growth in public residential building and commercial real estate completions. However, the overall construction spending is still 8 percent below a year ago. •Construction spending rose 0.1 percent in June. The rise came from completions of new home construction as well as commercial projects—medical buildings, power, waste and water plants. Office building construction was also up slightly while other commercial real estate building completions fell slightly. Public construction spending rose by 1.5 percent.

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Tuesday, 08/03/10•Pending home sales edged down in the post-tax credit market. Read the news release >

Economic Updates

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Wednesday, 08/04/10 •Mortgage purchase applications increased 1.5 percent for the week ending July 30th, the third consecutive increase in the index but still near 13-year lows. Purchase applications were driven by the government portion of the index (essentially FHFA loans) which was up 3.4 percent for the week.•Purchase applications do not take into consideration all-cash purchases which according to the REALTORS® Confidence Index made up 25 percent of transactions.•Purchase applications were down 33.7 percent from the same week a year ago.•Refinances were up 1.3 percent, as mortgage rates fell to 4.6 percent for a 30-year fixed mortgage.

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Wednesday, 08/04/10 (Cont’d)

•Private sector jobs were up 42,000 in July according to the ADP report, slightly better than had been expected.•The service sector continued its expansion in July with the Institute for Supply Management increasing to 54.3, up from 53.8 in June (levels over 50 indicate growth in the sector).

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Thursday, 08/05/10•The number of people requesting unemployment checks increased by 19,000 in the past week. The current figure of 479,000 is now at the highest level since April. It needs to fall below 400,000 to make any improvement in the unemployment rate, which is expected to remain at about 10 percent through the end of the year. •The total number of people who continue to receive unemployment benefits decreased by 34,000 to 4.54 million. The labor market is expected to remain weak for next several months.  

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Friday, 08/06/10•Non-farm payroll employment fell by 131,000 jobs from June to July. The government cut roughly 143,000 temporary Census jobs in June along with additional cuts at the state and local level, while the private sector added 71,000 jobs. •On the bright side, jobs growth has risen steadily in the durable manufacturing and transportation/warehousing sectors, signs that an early economic recovery is spreading. The health care and social assistance industry remains a steady engine of job growth. Meanwhile, the unemployment rate was unchanged at 9.5% with a large overhang of 14.6 million persons out of work.

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Friday, 08/06/10 (Cont’d)•The rate of job creation remains anemic. Roughly 630,000 private sector jobs were created in the first six months of 2010 leaving a huge gap to fill from the 8.4 million jobs that were lost in the 24 months ending in December of 2009.•This month’s employment picture was below expectations and far less than is needed to drive a robust economic expansion. Floundering job creation will weigh on confidence and demand for housing. •However, the fact that jobs are being created means that fewer persons will fall into foreclosure as a result of job cuts and soft economic numbers will keep mortgage rates low, helping to drive sales, reduce supply, and stabilize prices.

Economic Updates

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