Wage Growth Accelerates

This week's economic data was the main influence on mortgage rates, and stronger than expected reports on wages, manufacturing and services caused mortgage rates to move higher. 

Pricing is an -.125 to -.250 worse since last Friday depending on the interest rate.

In Friday's highly anticipated Employment report, investors focused on stronger than expected wage growth. In August, average hourly earnings were 2.9% higher than a year ago, up from 2.8% last month, and the largest annual rate of increase since April 2009. Since stronger wage gains raise the outlook for future inflation, the data was negative for mortgage rates.

Beyond the wage data, the other components of the report were roughly neutral. The economy added 201,000 jobs in August, above the consensus of 190,000, but downward revisions subtracted 50,000 jobs from the results for prior months. The unemployment rate was flat at 3.9%, matching expectations.

Some of the earliest major economic data released each month comes from the Institute of Supply Management (ISM) which provides reports on activity in manufacturing and services, and both sectors performed much better than expected in August. The ISM national manufacturing index surged to 61.3, the highest level since May 2004 and the second strongest figure ever recorded. Similarly, the ISM national services index jumped to 58.5. Readings above 50 indicate an expansion, and both sectors have been improving at near record rates for many months. As with the wage data, mortgage rates moved higher following these strong reports.

Looking ahead, the JOLTS report, which measures job openings and labor turnover rates, will be released on Wednesday. Fed officials value this data to help round out their view of the strength of the labor market. The Consumer Price Index (CPI) will come out on Thursday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales will be released on Friday. Consumer spending accounts for about 70% of all economic activity in the U.S., and the retail sales data is a key indicator of growth. In addition, the European Central Bank meeting on Thursday could influence U.S. mortgage rates. 

 

Weekly Change:

Mortgage Rates rose 0.05

DOW fell 50

NASDAQ fell 150

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