The big economic news this past week was a second straight Employment report which far surpassed expectations. Nearly all of the recent data has indicated that the recovery from the partial shutdown of the economy due to the pandemic has been faster than anticipated. Despite the strong data, though, it was another quiet week for mortgage markets, and rates remained near record low levels.
To get a sense of the unprecedented magnitude of the recent monthly changes in the labor market, typical monthly readings were for job gains of around 200,000 in 2019. In June, the economy added a massive 4.8 million jobs, which was well above the consensus forecast for an increase of 3.0 million and a record high. The unemployment rate dropped sharply from 13.3% to 11.1%, which also was much better than the consensus forecast.
The details of the report contained nothing to diminish the extremely positive results. The leisure and hospitality sector gained 2.1 million jobs in June, and retail added another 740,000. In general, the sectors which were hurt the most by the shutdown of much of the economy due to the pandemic showed the largest rebounds.
Another major economic report released this past week also contained clear signs of a strong recovery. The ISM national manufacturing index unexpectedly jumped from 43.1 to 52.6, which was the highest level since April 2019. Readings above 50 indicate an expansion in the sector.
In the minutes from the June 10 Fed meeting released on Wednesday, the Fed again said that it will use all its available tools for as long as necessary to support the economy and that “highly accommodative” monetary policy likely will remain appropriate for quite a while. In particular, the Fed does not expect to raise the federal funds rate through at least 2022 and will continue to buy at least $80 billion in Treasuries and $40 billion in mortgage-backed securities (MBS) each month.
Looking ahead, investors will continue to watch for news about medical advances, government stimulus programs, Fed monetary actions, and plans for reopening the economy. Beyond that, it will be a very light week for economic data. Most notably, the ISM national services index will be released on Monday, July 6.
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