On the Economy

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Jerome Powell after the most recent FOMC meetings.

A Review of Housing, Jobs, and the Value of the Dollar

At the end of January, the Federal Reserve board again maintained its current guidance for monetary policy, with inflation waning and the labor marketing remaining strong.

During the last two years, the Fed has raised rates by 5.25 percentage points and reduced securities holdings by about $1.3 trillion.

“The Fed’s monetary policy actions are guided by our mandate to promote maximum employment and stable prices for the American people. My colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of essentials like food, housing, and transportation,” Jerome Powell, the chairman of the Federal Reserve, said in his statement following the meetings. “We are highly attentive to the risks that high inflation poses to both sides of our mandate, and we are strongly committed to returning inflation to our 2 percent objective.”

Housing starts to end 2023 were down 4.3 percent to a 1.46 million annual rate, but ahead of the prevailing consensus expectation of 1.425 million. Housing starts are up 7.6 percent versus a year ago. Manufactured homes claim about 9 percent of annual home starts.

“While the data have been choppy, it seems that developers may have finally found their footing as we closed out the year in what had been a challenging environment for sales,” First Trust Advisers Chief Economist Brian Wesbury stated in a letter to subscribers. “This likely has to do with the recent move in mortgage rates, driven by the widely held belief that the Federal Reserve will cut short term interest rates multiple times in 2024.”

The first jobs report of the year reminded us of the labor market’s resilience, adding 353,000 jobs during the period, more than double the number a majority of analysts anticipated.

The Bureau of Labor Statistics said payroll employment increased by an average of 255,000 per month in 2023. December job growth was revised to the upside, significantly, as well. In January, job gains occurred in professional and business services, health care, retail trade, and social assistance.

Wages were up 0.6 percent on the month and 4.5 percent for the year. Unemployment remained at 3.7 percent.

Most analysts now believe a rate cut won’t come until mid year.

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