The US economy looks like it's heading toward a strong finish for 2018. The ADP employment report was stronger than expected and construction spending was unchanged overall, but residential spending improved. The S&P CoreLogic Case-Shiller home price index appreciated, but price appreciation has started to slow.
The Case-Shiller home price index appreciated 0.1% month-over-month and 5.5% year-over-year, in August. This month marks the first time in over a year that annual gains dipped below 6%. Appreciation was driven by Las Vegas, up 13.9% year-over-year, followed by San Francisco, up 10.6% year-over-year, the only two metros posting double-digit annual gains. Almost half of the cities on the 20-city index showed month-over-month declines or no change, signaling the red-hot housing market may be starting to cool down.
The ADP employment report exceeded expectations in October, with the addition of 227,000 jobs. Large firms added 102,000 jobs, mid-size companies added 96,000 jobs, and small businesses added 29,000 jobs. The American labor market continues to strengthen, as the strong jobs report coincides with the record-low 3.7% unemployment rate. The data also suggests that hiring and employment were not greatly impacted by the hurricane season.
US construction spending was unchanged in September at a seasonally adjusted annual rate of $1.33 trillion. However, August's figure was revised upward to a 0.8% gain. Residential construction spending, specifically, increased 0.6%, driven by an 8.7% increase in apartment building construction. Spending on government projects declined 0.9%.
The Federal Open Market Committee will meet on Tuesday and Wednesday of next week, but no major interest rate movement is expected. Most economists expect one more rate hike this year, following the December meeting. Although mortgage rates have started to rise, they are still low by historic standards. Home buyers who are on the fence, may want to buy now before rates continue rising.