The major economic data released this week was a little stronger than expected overall, which was mildly negative for mortgage rates. However, this was entirely offset by continued concerns about the impact of the coronavirus, and mortgage rates ended the week nearly unchanged.
Against a consensus forecast of 160,000, the economy added an impressive 225,000 jobs in January. The unemployment rate unexpectedly increased from 3.5% to 3.6%, but this was due to additional workers entering the labor force which is a sign of strength. Average hourly earnings slightly exceeded expectations after factoring in upward revisions to last month’s results. Wages were 3.1% higher than a year ago, up from an annual rate of 3.0% last month.
Two other closely watched economic reports also were released this week. The ISM national manufacturing index rose far more than expected from 47.2 to 50.9, which was the highest level since July. Readings above 50 indicate an expansion in the sector. Manufacturing activity has been constrained in recent months by the slowdown in global trade resulting from increased tariffs and other restrictions imposed by the US and China, so this report was viewed by some as a hopeful sign that the sector may be recovering. The ISM national services index also exceeded expectations with a solid reading of 55.5.
There was little new information this week to help reduce the uncertainty about the magnitude of the spread of the coronavirus or its negative effect on global growth. As a result, investors generally opted to play it safe and reduce the level of risk in their portfolios heading into the weekend.
Looking ahead, the JOLTS report, which measures job openings and labor turnover rates, will be released on Tuesday. 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. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth. In addition, news about the coronavirus, the US elections, or the trade negotiations with China could have an influence.
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