Investor concerns about stubbornly high inflation levels and the aggressive response by global central banks increased last week, while the major economic reports were roughly neutral overall. As a result, mortgage rates ended the week higher.
The closely watched Employment report released on Friday revealed mixed results. Against a consensus forecast of 320,000, the economy gained 315,000 jobs in August, but the figures for prior months were revised lower by 107,000. The best performing sector was professional and business services, followed by health care and retail. After several strong months, the leisure and hospitality sectors were relatively weaker.
The unemployment rate unexpectedly increased from 3.5% to 3.7%, but this was mostly due to a large number of people entering the labor force, a sign of strength. Average hourly earnings, an indicator of wage growth, were 5.2% higher than a year ago, which was slightly below expectations. In a separate report released on Tuesday, job openings remained near record levels above 11 million, over 4 million more than in January 2020. There are now approximately two vacant jobs for every unemployed worker.
Another significant economic indicator released this week from the Institute of Supply Management (ISM) revealed that the manufacturing sector held steady while the prices paid for materials posted a welcome decline. The national manufacturing sector index was unchanged at 52.8, which was a little stronger than expected. Levels above 50 indicate that the sector is expanding. The prices paid index fell sharply for the second straight month to the lowest level since June 2020.
Going forward, investors are hoping for more specific Fed guidance on the pace of future rate hikes and bond portfolio reduction. The next European Central Bank meeting will take place on Thursday as they try to deal with record levels of inflation. It will be a very light week for economic data with the biggest report being the ISM services sector index today.
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