2/21/25: US Economic Update: FOMC Minutes, Housing Market Trends, and Jobless Claims

Although economic data was light this holiday shortened week, market participants gained further insight into the possible path forward for monetary policy through the release of the Federal Open Market Committee (FOMC) meeting minutes as well as trends in the US housing market. 

On Tuesday, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index for single-family housing reflected a five point drop in builder confidence month-over-month falling to 42 which is the lowest reading in five months. The NAHB stated that the steel and aluminum tariffs which are scheduled to be implemented by mid-March will likely raise home building costs.

Meanwhile, US Housing starts decreased 9.8% to an annual pace of 1.37 million in January falling from a revised 16.1% increase in December. Building permits moved slightly higher last month while single family permits were unchanged. Although the number of home completions rose for the first time in four months, the number of new homes under construction fell 1.4%. Additionally, sales of existing US homes fell last month for the first time since September dropping 4.9% to an annualized rate of 4.08 million. Regionally, the decline was most pronounced in the west and south which were affected by devastating wildfires and severe weather. Higher mortgage rates and elevated home prices continue to have an impact on affordability with a 30-year mortgage hovering around 7%, and the median sale price up 4.8% from a year ago.

The Federal Reserve on Wednesday released the minutes of the Federal Open Market Committee meeting held January 28-29, 2025. The minutes reflected exercising caution with regard to adjusting interest rates and wants to see “further progress on inflation” before cutting interest rates again.

Initial jobless claims were little changed last week, increasing 5,000 to 219,000, and continuing claims increased to 1.87 million in the week ended February 8th. Although weekly claims data can be volatile, market participants will be looking for early signs of the impact of the Trump administration’s firings across the federal workforce. Nevertheless, based on recent data, the US labor market is moderating but reflecting continued resilience.

The Conference Board Leading Economic Index (LEI) fell 0.3% in January, which was below the median estimate of -0.1%. The monthly decline was primarily driven by consumer assessments of future business conditions becoming more pessimistic. This morning’s University of Michigan Sentiment Index decreased to 64.7 for February, due to concerns over inflation and the economic outlook. The index reflected more than half of consumers expecting unemployment to rise over the next year. The 1-year inflation outlook remained unchanged at 4.3%, however, long-run inflation expectations moved higher, up from the preliminary report of 3.3% to the final reading of 3.5%.

After US Treasury rates surged on higher-than-expected inflation data last week, rate levels are down slightly this week. As of this morning, the 2-year note is trading at 4.20%, the 5-year note at 4.25%, and the 10-year yield at 4.41%. Next week the market will be focused on the release of the Personal Consumption Expenditures (PCE), and more specifically the Core PCE which is the Fed’s preferred gauge of inflation.

As always, the Chandler team will monitor incoming economic data closely but be cognizant of the rapidly changing investing environment as a result of the new administration’s policy actions. In the near term, the cumulative effect of tariffs, immigration, deregulation, the federal workforce, and federal budget will be difficult to analyze until we have more clarity through incoming data regarding the implementation of these policies. In the current environment, the Chandler team is forecasting a moderation in both the pace and magnitude of easing of the Fed Funds rate in 2025.

Next week: Chicago Fed National Activity Index, Philadelphia Fed Non-Manufacturing, S&P CoreLogic Case Shiller 20-City Home Price Index, Consumer Confidence, Richmond Fed Manufacturing Index, New Home Sales, GDP, Durable Goods Orders, Initial Jobless Claims, Continuing Claims, Pending Home Sales, Personal Income/Spending, Personal Consumption Expenditures (PCE)

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