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Federal Reserve
Growth will probably pick up after a weak start to the year, according to Federal Reserve policy makers, who are trying to figure out when the economy will be strong enough to withstand their first interest rate increase since 2006.
Fed Chair Janet Yellen said in a May 22 speech she expects the economy to return to a “moderate” pace of growth after a disappointing first quarter as headwinds such as a cooling global economy abate.
Stronger growth would help boost industries including housing, which has shown choppy improvement over the past few months. Steady hiring, low borrowing costs and a limited supply of existing homes has spurred demand for new properties even as sluggish wage growth keeps some buyers out of the market.
“Economic fundamentals are in place to support the housing market,” Dave Liniger, chief executive officer of Re/Max Holdings Inc., said on a May 8 conference call. “More people are getting jobs, soon employers may be competing for employees, which should push wages higher. Wage growth coupled with increased consumer confidence should spur more activity on the housing market.”
Hourly Earnings
The Labor Department’s monthly employment data showed hourly pay was up 2.2 percent in April compared with a year earlier, holding within the narrow range it’s tracked over the past four years. The report also showed payrolls climbed by 223,000 last month after an 85,000 gain in March that was the smallest since June 2012.
Weak wages may not be the only thing holding back consumer confidence. Gas prices, which economists say helped prop up sentiment earlier this year, have recovered from their lows.
The average price of a gallon of regular gasoline was $2.74 on May 28, about the highest level since early December. While that’s 35 percent higher than a more than five-year low reached in January, it’s still less than last year’s peak of $3.70. |
