As I reported in MGIC’s latest Market Trend Analysis Report, the US economy continues to grow at a steady rate as we move into 2017. After showing less-than-stellar growth earlier in 2016, the US economy rebounded sharply in the third quarter and looks like it finished the year on a positive note. As the new Administration inherits the responsibility for the economy, it seems like we can expect that there will be some policy changes going forward. Some of these may include additional spending on infrastructure, the military and veterans’ benefits. The new Administration is also discussing issues surrounding regulations on immigration and taxes. There is no accurate way to gauge the impact of any changes until more details are known. Some economists see a potential for a recession in the coming 2 years, but the risk remains low for the short term.
Even though total job gains in 2016 were less than the previous few years, this is not unexpected considering the length of the current expansion period as well as the fact that the US is approaching full employment. The unemployment rate was below 5% over the past 12 months, further demonstrating the tight labor market. Job growth was still strong enough to accommodate new entrants into the workforce. California, Florida, Texas, New York and Georgia reported some of the strongest job gains. The number of job openings remained near 5.5 million, which should contribute to stronger wage growth.
Similar to the overall economy, the housing market grew at a moderate rate. The lack of inventory, both new and existing units, has been one of the biggest factors impacting the housing market. Home builders are having a difficult time. Some of this is due to low supply of available lots, while others are faced with a shortage of qualified workers. The lack of available homes has potential sellers sitting tight, not knowing whether they’ll be able to find acceptable housing should they elect to sell their home. All of this has contributed to rising home prices, and in many markets increases have outpaced the rise in income.
Based on the data and the forecasts we are reading, the overall economic outlook remains generally positive for 2017.
For more specific market details, please see the full Market Trend Analysis Report.
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