Overview: Over the past week, the major economic data came in very close to the expected levels, which should have been neutral for mortgage rates, and there was little other significant economic news. Despite this, rates continued their recent upward trend, rising above 5.0% for the first time in eight years, up from levels close to 4.0% a year ago.
The key monthly Employment Report released on Friday showed continued strength in the labor market. While the consensus forecast was 180,000, the economy gained just 134,000 jobs in September. However, upward revisions added 87,000 jobs to the results for prior months, meaning the total gains for the month were slightly above the expected levels. The economy has added an average of 211,000 workers per month so far in 2018, above even the strong pace of 182,000 seen over the same period last year.
In addition, the unemployment rate unexpectedly declined from 3.9% to 3.7%, the lowest level since 1969. Part of the reason for the historically low rate is that a relatively smaller percentage of working-age Americans have chosen to enter the labor force. Average hourly earnings, which are an indicator of wage growth, were 2.8% higher than a year ago, the same annual rate of increase as last month.
Looking ahead, 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. The Retail Sales report will be released on October 15. 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. The Industrial Production Index, another important indicator of economic growth, will come out on October 16. The minutes from the September 26 Federal Reserve meeting will come out on October 17. These detailed minutes provide additional insight into the debate between Fed officials about future monetary policy and have the potential to move markets.