Weaker than expected labor market data was positive for mortgage rates this past week. However, this was offset by a rally in the stock market, which pulled assets out of the bond market. The net effect was that mortgage rates ended the week with little change.
The U.S. ended a great year for job growth on a mildly disappointing note. Against a consensus forecast of 190,000, the economy added just 148,000 jobs in December. Despite the shortfall, however, average job gains over the last three months were a strong 204,000. It appears that an early Thanksgiving holiday may have pulled some hiring into November from December in the retail sector.
The unemployment rate remained at 4.1%, the lowest level since 2000. Average hourly earnings, an indicator of wage growth, were 2.5% higher than a year ago, up from 2.4% last month. The small miss in job growth was slightly positive for mortgage rates.
The minutes from the December 13 Fed meeting released on Wednesday contained no significant surprises. At the meeting, Fed officials spent a lot of time debating the likely impact of the recent tax cuts on economic growth. The minutes also revealed that officials remained divided about whether the low levels of inflation seen in 2017 were mostly due to temporary factors or long-term ones. Investor expectations for the pace of future rate hikes were nearly unchanged after the release of the minutes.
Looking ahead, Friday will be the big day with Retail Sales and the Consumer Price Index (CPI). Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. In addition, the JOLTS report will come out on Tuesday. JOLTS measures job openings and labor market turnover rates.
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