Overview: The major economic data released over the past week was much stronger than expected. Despite the upside surprises, however, mortgage rates ended the week a little lower.
Friday's key monthly Employment Report confirmed that the rollout of the vaccine and the reopening of the economy is causing companies to bring back some of the employees who have been out of work due to the pandemic. In March, the economy gained 916,000 jobs, far above the consensus forecast of 625,000, and revisions added 156,000 jobs to the results for prior months. The most impressive gains were seen in hospitality, one of the hardest-hit sectors during the pandemic.
The unemployment rate dropped from 6.2% to 6%, matching expectations. Average hourly earnings, an indicator of wage growth, fell slightly from February, below the consensus for a modest increase. Earnings were 4.2% higher than a year ago, down from 5.2% last month, because most of the unexpected job creation was in lower paying sectors.
Exceptional strength also was seen this week in two other closely watched reports. The Institute for Supply Management (ISM) Manufacturing Index jumped to 64.7, well above the consensus forecast of 61.5, and the best level since 1983. Similarly, the ISM Services Index soared to 63.7, far above the consensus forecast of 59, and the highest level ever recorded. Readings above 50 indicate an expansion in each sector.
Looking ahead, investors will continue watching COVID case counts and vaccine distribution. Beyond that, the Consumer Price Index (CPI) will come out on April 13. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. The Retail Sales report will be released on April 15. Since consumer spending accounts for over two-thirds of all economic activity in the U.S., the retail sales data is a key indicator of growth.
Monthly Job Gains (millions)