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Job Gains Stumble, Inflation Rises

April 11, 2018

 

Overview: Despite the release of some important economic data, it was another quiet week for mortgage markets. There was little reaction to the labor market data, the inflation data, or the Federal Reserve meeting minutes, and mortgage rates ended the week nearly unchanged.

In March, the economy added just 104,000 jobs, below the consensus forecast of 175,000. In addition, downward revisions subtracted 50,000 jobs from the results for prior months. Average hourly earnings, an indicator of wage growth, slightly exceeded expectations. They were 2.7% higher than a year ago, up from an annual rate of 2.6% last month.

 

The most recent inflation data showed the expected increase in the annual rate of core inflation. In March, the core Consumer Price Index (CPI) was 2.1% higher than a year ago, up from an annual rate of 1.8% last month. This was the highest level since February 2017.

 

The minutes from the March 21 Fed meeting released on Wednesday revealed that officials expect the economy to grow at an above average pace for the next few years and that they are more confident that inflation will rise to their target level of 2%. Officials also discussed a potential need at some point in the future to communicate a switch to a monetary policy stance which is “neutral,” meaning that it neither supports nor restricts economic growth. Since the financial crisis, they have described it as “accommodative,” meaning that it is intended to boost growth. Investors expect the Fed to raise the federal funds rate again in June. 
 
Week Ahead 

Looking ahead, the Job Openings and Labor Turnover Survey (JOLTS) report comes out on Friday. The Retail Sales report will be released on April 16. Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data are a key indicator. The Industrial Production and Capacity Utilization report, another important indicator of economic activity, will come out on April 17, along with the New Residential Construction report (also known as Housing Starts).

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