Job Gains Disappoint
- Mortgage Returns
- Aug 6
- 2 min read
Overview: The story for mortgage markets over the past week was straightforward. The monthly Employment Report released on Friday showed that job gains in recent months were much weaker than expected. As a result, mortgage rates ended the week lower.
The highly anticipated monthly Total Nonfarm Payroll labor market report revealed that the economy added just 73,000 jobs in June, below the consensus forecast of 100,000. By itself, this relatively minor shortfall would have caused little concern to investors, but revisions also reduced the results for the prior two months by a staggering 258,000. The scant pockets of strength were seen mostly in the health care, social assistance, and retail sectors, while federal government employment declined. Looking at the other major components of the report, the unemployment rate rose from 4.1% to 4.2%, as expected. Average hourly earnings, an indicator of wage growth, were 3.9% higher than a year ago, up from an annual rate of increase of 3.7% last month. This also matched expectations.
Two other significant economic reports released this week by the Institute for Supply Management (ISM) were also weaker than expected. The ISM Services Index fell to 50.1, and the ISM Manufacturing Index declined to 48. Readings above 50 indicate an expansion in the sectors and below 50 indicate a contraction. Service companies continue to outperform manufacturers, but higher tariffs on foreign goods may help boost domestic manufacturing and narrow the gap over time.
With investors focused on inflation, the Personal Consumption Expenditures (PCE) Price Index, the favored indicator of Fed officials, carries a lot of weight each month. In June, core PCE was 2.8% higher than a year ago, matching expectations and the same annual rate of increase as last month. Progress toward the 2% inflation goal of the Fed remains challenging, and this target level has not been seen since February 2021. Investors are watching closely to see if higher tariffs will exert upward pressure on future inflation levels.
Job Gains (thousands)
Week Ahead
Aug. 12
Consumer Price Index (CPI)
Aug.14
Producer Price Index (PPI)
Aug. 15
Retail Sales report
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