This week is employment data week, which is a very important week for the markets. Since last month’s report a lot has happened. A lot of the focus has been on the international side with the default crisis in Greece, nuclear talks with Iran and the stock market fallback in China. These international events are very important, especially in light of the fact that the markets are anticipating an increase in rates from the Federal Reserve Board, possibly as soon as next month.
If the jobs report is strong, the speculation regarding a rate increase will grow. However, all these intervening variables are being watched by the Fed. We also had an avalanche of earnings reports last month and if the stock market is under pressure because of lower earnings, this is another economic issue the Fed needs to factor into a decision as higher rates can also make stocks less attractive. The preliminary number for economic growth in the second quarter came in at 2.3%, which is a solid but not spectacular number that will be factored into the Fed’s decision. This number will be revised before the Fed meets again in September.
Real estate seems to be the one area of the economy that appears to be weathering the international news and upward pressure on rates. Last month we saw another month of rising existing home sales, though new home sales were weaker. Even these numbers can be affected by rates as consumers rush to beat future rate increases. For now, the real estate sector is contributing positively to the economy which is why the Fed is watching the real estate markets very closely as well.