Weaker than expected labor market data was positive for mortgage rates this past week, while an easing of tensions with Iran was negative. Neither influence was large, and rates ended the week nearly unchanged.
Against a consensus forecast of 160,000, the economy added just 145,000 jobs in December, and revisions subtracted 14,000 jobs from the results for prior months. Average job gains over the last three months still are an impressive 184,000. Hiring was strong in retail and construction, while weakness was seen in manufacturing and transportation.
The primary source of unexpected weakness came from another major component of the Employment report which measures wage growth. Average hourly earnings were just 2.9% higher than a year ago, down from 3.1% last month, and the smallest annual rate of increase since July 2018.
In apparent retaliation for last week’s killing of a top Iranian military official, Iran launched rockets at an Iraqi military base which hosts US troops on Tuesday night. Concerned that this could lead to a major conflict in the Middle East, investors were watching the situation closely. However, President Trump took a very conciliatory tone in a press conference on Wednesday, and it looks like both sides want to avoid further escalation.
Looking ahead, the Consumer Price Index (CPI) will come out on Tuesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales will be released on Thursday. 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. Housing Starts will come out on Friday. In addition, news about Iran or the trade negotiations with China could have an influence.
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