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Jobs Up, Unemployment Down, But Wage Growth Doesn’t Match Projections

Overview: Over the past week, investors were pleased that there were no significant surprises in the major U.S. economic data or in the news from global central banks. As a result, mortgage rates ended the week a little lower.


The important labor market data released on Friday suggested that U.S. economic growth remained strong without exerting much upward pressure on inflation. The economy added 196,000 jobs in March, above the consensus forecast of 170,000, and upward revisions added another 14,000 jobs to the results for prior months. The health care and leisure and hospitality sectors were particularly strong. The unemployment rate remained at 3.8%. However, the increase in wage growth seen over the last several months unexpectedly reversed in March. Average hourly earnings were just 3.2% higher than a year ago, down from 3.4% last month.

The most recent inflation data also was mixed. In March, the Consumer Price Index (CPI), a widely followed monthly inflation report that looks at the price change for goods and services, rose slightly more than expected from February. However, Core CPI, which excludes the volatile food and energy components, increased a bit less than expected from February. Core CPI was 2.0% higher than a year ago, down from an annual rate of increase of 2.1% last month.

The latest news from the two largest global central banks revealed no deviations from their prior guidance. The detailed minutes from the March 20 Federal Reserve meeting released on Wednesday confirmed that most officials think the federal funds rate is close to its appropriate long-run level and that additional changes likely will not be needed this year. The European Central Bank (ECB) made no policy changes at its meeting on Wednesday, and the comments from ECB President Mario Draghi about the outlook for future monetary policy were similar to the last meeting. Officials from the Fed and ECB noted uncertainties about the pace of global economic growth, the trade talks, and the British exit (Brexit) from the European Union.

Week Ahead

Looking ahead, it will be a light week for economic reports. Most notably, the Retail Sales report will be released on April 18. 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 Brexit or about the trade negotiations between the U.S. and China could affect mortgage rates.

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