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Labor Market Outperforms

Overview: Over the past week, there was little change in the outlook for the economic impact of the coronavirus, and stronger than expected labor market data caused just a minor reaction. As a result, mortgage rates ended the week nearly unchanged.


The Employment Report is generally the most highly anticipated economic release each month. In January, the economy gained 225,000 jobs, well above the consensus forecast of 160,000. Given the powerful job gains, it may seem strange that the unemployment rate unexpectedly increased from 3.5% to 3.6%. However, it is necessary to examine the cause of the increase to determine its implications. In this case, it was due to additional workers choosing to enter the labor force, which they typically do during a strong labor market when they see good job opportunities. In short, a lot more people were working, but an even larger number began the process of looking for a job this month. Nearly every investor viewed this growing labor force as a sign of strength.

The other component of the Employment Report that is closely watched by investors is its wage-growth measurement. Average hourly earnings slightly exceeded expectations in January after factoring in upward revisions to the prior month's results. Wages were 3.1% higher than a year ago, up from an annual rate of 3.0% in December.

There was little new information over the past week to help investors more precisely determine the magnitude of the negative effect of the coronavirus on global economic activity. Estimates for first-quarter gross domestic product (GDP) growth around the world have been adjusted lower due to the disease, but they vary widely.

Monthly Job Gains (thousands)

Week Ahead

February 13 — Consumer Price Index (CPI)

February 14 — Retail Sales report

February 17 — Mortgage markets closed in observance of Presidents’ Day

February 19 — New Residential Construction report (Housing Starts)

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