Overview: Once again, the stock market was volatile over the past week, while it was a relatively quiet period for mortgage rates. The major economic data was mostly right on target, and rates ended the week with little change.
Friday's key labor market report showed continued solid job gains and wage growth, but it was slightly weaker than expected overall. The economy added 155,000 jobs in November, a little below the consensus forecast of 190,000, while the revisions to the results for prior months were minor. As expected, the unemployment rate was unchanged at 3.7%. Average hourly earnings, an indicator of wage growth, were 3.1% higher than a year ago, which was the same annual rate of increase as last month and matched the fastest pace since 2009. The small shortfall in job gains caused little reaction from investors.
In addition to the labor market data, an important inflation indicator was released this week, but it matched the expected results exactly. The Consumer Price Index (CPI) is a widely followed monthly inflation report that looks at the price change for goods and services. In November, CPI was flat from October and was 2.2% higher than one year ago. Core CPI, which excludes the volatile food and energy components, increased a little from October and also was 2.2% higher than one year ago.
Looking ahead, the next Federal Reserve meeting will take place on December 19, and most investors expect a 25 basis point rate hike. Before that, the Retail Sales report will be released on Friday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth. The Industrial Production and Capacity Utilization report, another important indicator of economic growth, also will come out on Friday. The New Residential Construction report (also known as Housing Starts) will be released on December 18, followed by the Existing Home Sales report on December 19. In addition, the next European Central Bank (ECB) meeting will take place on December 13 and could influence U.S. mortgage rates.