Job Gains Surpass Forecasts
- Mortgage Returns
- May 7
- 2 min read
Overview: The major economic data released over the past week was a little stronger than expected overall, and there were no significant surprises from the Federal Reserve meeting. As a result, mortgage rates ended the week slightly higher.
As expected, the Fed left the federal funds rate unchanged on Wednesday at a target range of 4.25% to 4.5%, where it has been since December. The meeting statement made clear that uncertainty about the economic outlook “has increased further,” and officials will wait to see the impact of government policy changes to determine adjustments to monetary policy. In addition, the statement noted that the risks of both higher unemployment and higher inflation have risen. The challenge for officials is that the former outcome would support lower rates while the latter would call for higher rates. Most investors currently anticipate that the Fed will reduce the federal funds rate in July.
Despite worries about the impact of higher tariffs, job growth was stronger than expected in April. Friday’s key Employment Report revealed that the economy added 177,000 jobs in April, above the consensus forecast of 130,000, but downward revisions to the results for prior months partially offset the excess gains. The strongest sectors included health care, transportation, and financial activities, while the federal government reported a loss of jobs. The unemployment rate remained at 4.2%, as expected. Average hourly earnings, an indicator of wage growth, were 3.8% higher than a year ago, the same annual rate of increase as last month.
Two other significant economic reports released over the past week by the Institute for Supply Management (ISM) also exceeded expectations. The ISM Services Index rose to 51.6, above the consensus forecast and the highest level since February 2024. The ISM Manufacturing Index fell to 48.7, above the consensus forecast of 48. Readings above 50 indicate an expansion in the sectors, and readings below 50 indicate a contraction. Service companies continue to outperform manufacturers.
Job Gains (thousands)
Week Ahead
May 13
Consumer Price Index (CPI)
May 15
Retail Sales report
Commentaires