Overview: Over the past week, weaker than expected labor market data caused investors to reduce their outlook for economic growth, while the latest inflation report matched expectations. As a result, mortgage rates ended the week lower.
The Personal Consumption Expenditures (PCE) Price Index is the favored inflation indicator of Federal Reserve officials. It covers a broader range of items and does more to account for changes in consumer behavior than the other closely watched major inflation report, the Consumer Price Index (CPI). In April, core PCE, which excludes food and energy to reduce short-term volatility, was up 2.8% from a year ago, matching the consensus forecast. This was the same annual rate of increase as last month and the lowest level since March 2021, but it remains well above the Fed's stated target of 2%.
The Job Openings and Labor Turnover Survey (JOLTS) report also is closely watched by Fed officials, and the latest data suggested easing conditions in the labor market. At the end of April, there were 8.06 million job openings, far below the consensus forecast and the fewest since February 2021. The ratio of openings to unemployed people dropped to just 1.2-to-1, the lowest since June 2021 and down from a peak around 2-to-1 two years ago. A lower number of openings suggests companies face less pressure to raise wages to hire enough workers.
Two other significant economic reports released this week by the Institute for Supply Management (ISM) revealed mixed results. The ISM Services Index rose to 53.8, well above the consensus forecast and the highest level since August 2023. By contrast, the ISM Manufacturing Index dropped to 48.7, below the consensus forecast. Readings above 50 indicate an expansion in the sector and below 50 indicate a contraction.
Core PCE (annual % change)
Week Ahead
June 6
European Central Bank meeting
June 7
Employment Report
June 12
Consumer Price Index (CPI)
U.S. Federal Reserve meeting
Commenti