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Labor Market Eases

Economic Observer: Up-to-date information on the latest financial news

Overview: Over the past week, the major economic data was weaker than expected. In particular, the tight labor market finally showed some signs of easing. As a result, mortgage rates ended the week lower, falling from their highest levels since November.


After surpassing expectations over the first three months of this year, the economy added just 175,000 jobs in April, below the consensus forecast of 240,000. The greatest strength was seen in the healthcare, social assistance, and retail sectors. The unemployment rate unexpectedly rose from 3.8% to 3.9%, matching the highest level since January 2022. Average hourly earnings were 3.9% higher than a year ago, the lowest annual rate of increase since May 2021. Federal Reserve officials carefully monitor wage growth because it generally raises future inflationary pressures.


Another labor market report watched closely by the Fed, the Job Openings and Labor Turnover Survey (JOLTS) report, suggested looser conditions in the labor market as well. At the end of March, there were 8.5 million job openings, which is below the consensus forecast of 8.7 million and the lowest level since February 2021. Because a smaller number of openings means that companies may feel less pressure to raise wages to hire enough workers, this weaker than expected data was favorable news for mortgage rates.


Two other significant economic reports released over the past week from the Institute for Supply Management (ISM) also were well below their consensus forecasts. The ISM Services Index fell to 49.4, the lowest level since December 2022, and the ISM Manufacturing Index dropped to 49.2. Readings below 50 indicate contraction in the sectors.


Job Gains (thousands)

Chart of Job Gains in thousands from August 2023 to April 2024


Week Ahead

May 14

Producer Price Index (PPI)

May 15

Consumer Price Index (CPI)

Retail Sales report


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