The Democratic Party swept the 2021 Georgia Senate runoff election, an unfavorable result for mortgage rates. While Friday’s labor market report was mixed, this week’s other major economic data was extraordinarily strong. This was also negative for mortgage rates.
As a result, mortgage rates rose a little. However, they remain near record-low levels, and are roughly a full point lower than a year ago.
2021 Georgia Senate Runoff Election
The Democrats won both seats in last Tuesday’s 2021 Georgia Senate runoff election. Subsequently, the Democratic Party gained control over both the Senate and the U.S. House of Representatives.
Investors expect that this will lead to increased government spending. In addition, investors also anticipate the Federal Government issuing more bonds to fund the spending. Overall, this impact would push bond yields higher.
Friday’s key Employment report from the Bureau of Labor Statistics contained mixed results. In December, the economy lost 140,000 jobs, below the consensus forecast for an increase of 75,000.
The result was also the first monthly decline since the unprecedented job losses in March and April caused by the partial shutdown of the economy. By far, the hospitality sector saw the hardest impact, hurt by the continued spread of the coronavirus.
Additional Economic Reporting
The other major areas of the report contained more optimistic news. Expected to rise to 6.8%, the unemployment rate instead stayed flat at 6.7%.
Average hourly earnings, an indicator of wage growth, rose 0.8% from November. This statistic is far above the consensus for an increase of just 0.2%. It is also an impressive 5.1% higher than a year ago.
There were indicators of unexpected strength in two other significant economic reports. The Institute of Supply Management (ISM) national manufacturing index jumped to 60.7 in December. Ultimately, this is well above the consensus forecast of 56.5. It is also the highest level since August 2018.
Due to the pandemic, many consumers are spending less money on travel and leisure activities. Instead, they were buying more goods. This has boosted the manufacturing sector.
Similarly, the ISM national services index rose to 57.2. The original consensus forecast was 54.5, near levels seen in the year before the coronavirus pandemic. Therefore, this number also exceeded expectations. Readings above 50 indicate that the sector is expanding.
Looking Ahead After the 2021 Georgia Senate Runoff Election
Looking ahead, investors will continue watching COVID-19 case counts and vaccine distribution. Meanwhile, the Consumer Price Index (CPI) will come out on Wednesday. Economic analysts widely follow the CPI monthly inflation report. It looks at the price change for goods and services.
Retail Sales will be released on Friday. Since consumer spending accounts for over two-thirds of all economic activity in the United States, the retail sales data is a key indicator of growth.
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