Overview: Over the past week, the biggest economic news was key labor market data, and it was close to expectations overall. As investors turned their attention to the next major inflation report being released on Friday, mortgage rates climbed a little higher.
The highly anticipated Employment Report released last Friday was essentially in line with the expected levels. The economy gained 390,000 jobs in May, which was a little above the consensus forecast. The leisure and hospitality sectors added a healthy 84,000 jobs, while the retail sector lost 61,000. Despite stronger than average gains every month since the start of 2021, the economy still has slightly fewer total jobs than in early 2020 prior to the pandemic. The unemployment rate held steady at 3.6%, which was very close to the lowest level since 1969. Average hourly earnings, an indicator of wage growth, were a substantial 5.2% higher than a year ago, but down from an even more impressive annual rate of increase of 5.5% last month.
In a separate labor market report released on Wednesday, the Job Openings and Labor Turnover Survey (JOLTS) data revealed that job openings remained near record levels, above 11 million, in April. This was over 4 million more than in January 2020. A high level of job openings reflects a strong labor market, as companies attempt to hire enough workers with the necessary skills. Continuing the recent trend, a large number of employees also voluntarily left their jobs in April. This is viewed as a sign of labor market strength as well, since people usually quit only if they are confident that they can find better jobs.
Higher mortgage rates have had a major impact on mortgage application volumes this year, which are now at the lowest levels in 22 years. According to the latest data from the Mortgage Bankers Association (MBA), purchase applications are down 21% from last year at this time, and applications to refinance a loan have plunged a massive 75% from one year ago. The MBA now forecasts that total mortgage originations this year will be 35% lower than in 2021 due to the enormous decline in refinances.
Unemployment Rate (%)
European Central Bank meeting
Consumer Price Index (CPI)
Retail Sales report
U.S. Federal Reserve meeting (50 basis-point rate hike is expected)