• INDICATOR: Revised Second Quarter GDP, August Pending Home Sales and Weekly Jobless Claims
• KEY DATA: GDP: 1.4% (up from 1.1%)/ Pending Sales: -2.4%/ Claims: +3,000
• IN A NUTSHELL: “A strong labor market doesn’t seem to be enough to get the housing market moving strongly forward.”

WHAT IT MEANS: Well, it turns out the economy grew faster in the spring than thought. Of course, the difference between a 1.4% growth rate and a 1.1% pace is minimal as the level is still disappointing – to say the least. However, the second revision to second quarter GDP did provide some hope for the future. Most of the added growth came from business investment, which instead of declining was actually up a touch. That is not to say businesses are out there investing like crazy, they are not, but this report makes it more likely firms are ramping things up even more this quarter as after tax profits were up.

The housing market is just not gaining any momentum. The National Association of Realtors reported that pending home sales eased in August, the third decline in four months. Only the Northeast showed an uptick in activity, but that is the smallest region. Inventory, or the lack thereof, was indicated to be the major issue. That has been a concern for quite some time now and with housing starts improving only slowly and new listings of existing homes barely keeping up with actual sales, it is hard to see that the restraint to sales will be removed anytime soon. The lack of supply will, however, keep pressure on prices.

Can people afford the rising home prices? Only if their incomes keep increasing as well and that has to come from higher wages. Clearly, the labor market is tight as unemployment claims, which rose a touch last week, remain near record lows. But that has been the case for months now and wage gains remain sluggish, so I don’t know when that might change.

MARKETS AND FED POLICY IMPLICATIONS: Today’s reports really shouldn’t move markets or Fed members. Yes, the economy is moving forward, but growth is hardly strong enough to force the FOMC to do anything. The key housing market is suffering from a lack of listings and new product and until that is corrected, sales will not rise sharply.

And until worker incomes rise faster, their ability to spend lots more money will remain limited. GDP growth this quarter, which ends tomorrow, should be solid enough to provide the Fed with the basis for raising rates in December, but only if the other data are supportive. At least the election will be over and either Janet Yellen will find herself in an untenable situation or she will be free to do what she should be free to do. When politicians attack the Fed, they politicize what almost every economist knows to be non-political decisions. That is dangerous as the last thing we need are politicians dictating monetary policy as well as fiscal policy. We know fiscal policy is a total disaster and the only adults left making economic policy in Washington reside at the Fed. I have been critical of Chair Yellen, but I also support her totally. Attacking her for political purposes is shameful, destructive and should be refuted. There, I have said my piece.

Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm. To read more of his blogs, CLICK HERE NOW.