This week, the excelling labor market actually offset weak manufacturing data. Additionally, investors worry over the pace of global economic growth this week. Overall, mortgage rates ended a little lower.
Excelling Labor Market Actually Offsets Sluggish Manufacturing Sector
Friday’s key monthly Employment report indicated an excelling labor market. Thus, mortgage rates faced a negative reaction. Also, the outlook for future inflation rose. Against a consensus forecast of 180,000, the economy added a whopping 312,000 jobs in December. In addition, upward revisions added 58,000 jobs to the results for prior months.
Unexpectedly, the unemployment rate increased from 3.7% to 3.9%. Analysts attribute this mostly to additional workers entering the labor force. However, they still view it as a sign of labor market strength.
Average hourly earnings, an indicator of wage growth, also surpassed expectations. They rose 3.2% higher than a year ago, up from 3.1% last month. In addition, average hourly earnings matched the highest annual rate of increase since April 2009.
Weaker Manufacturing Sector & Fed Comments
Aside from the excelling labor market, Thursday’s manufacturing report came across as weak. The ISM national manufacturing index fell sharply from 59.3 to 54.1. therefore, the national manufacturing index dropped below the consensus of 58.0. In doing so, it hit the lowest level since November 2016. Despite the shortfall, readings above 50.0 indicate an expansion in the sector.
Beyond the reporting, investors paid close attention to comments by Fed Chair Powell on Friday. Of note, Powell said that the Fed is not on a “preset path” for monetary policy and is open to adjustments based on changing financial conditions. Investors felt encouraged that the Fed may scale back the pace of monetary tightening in response to signs of slowing economic growth or financial market turbulence.
Looking Ahead After Excelling Labor Market
Looking ahead after the excelling labor market, the ISM national services index releases on Monday. The minutes from the December 19th Fed meeting come out on Wednesday. These detailed minutes provide additional insight into the debate between Fed officials about future monetary policy and have the potential to move markets.
The Consumer Price Index (CPI) comes out on Friday. Investors widely follow CPI since it looks at the price change for goods and services. In addition, Treasury auctions on Wednesday and Thursday hold potential to influence mortgage rates.
Also note that the government shutdown (which started December 22nd) caused delays in economic reporting. It is likely to continue creating delays while it stays in effect. Generally, the government offers little insight in advance as to when the impacted data will be ready to be released.
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