Mixed Employment Data

 

The main influence on mortgage rates this week was Friday's Employment report which was viewed on balance as a little weaker than expected. The Fed minutes and the other data had just a minor impact. As a result, mortgage rates ended a little lower. 

Pricing is roughly the same since last Friday, an +.125 better on some rates.

Against a consensus forecast of 190,000, the economy gained 213,000 jobs in June. In addition, upward revisions added 37,000 jobs to the results for prior months. The economy has gained an average of 215,000 jobs per month so far this year, exceeding even the strong pace of 182,000 seen over this period last year. 

The unemployment rate increased from an 18-year low of 3.8% to 4.0%, above the consensus for a flat reading of 3.8%. There are two factors which influence the unemployment rate, and June's increase was due to a surge of workers entering the labor force rather than job losses, so this actually was viewed as a sign of strength. 

Average hourly earnings, an indicator of wage growth, fell slightly short of expectations. They were 2.7% higher than a year ago, the same annual rate of increase as last month. Overall, the shortfall in wage growth was viewed by investors as more significant than the strong job gains, and mortgage rates moved a little lower after the data.

The minutes from the June 13 Fed meeting released on Thursday contained no major surprises and caused little reaction for mortgage rates. Noteworthy, though, Fed officials discussed both upside and downside risks to the economy. They pointed to the recent tax cuts as a potential source of support for economic growth in coming years, but also the risk that increased trade tensions could slow future investment activity, which would be negative for the economy.

Looking ahead, the inflation data will get the most attention. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for finished goods and services. In addition, Treasury auctions on Wednesday and Thursday could influence mortgage rates. 

 

Weekly Change:

Mortgage Rates fell 0.05

DOW rose 100

NADAQ rose 100

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