Unemployment Rate Plummets

September 9, 2020

 

Overview: Over the past week, stronger than expected major economic data did not have much effect on mortgage markets. Rates again ended little changed, close to record-low levels.

Friday's closely watched monthly labor market report revealed that the economy has continued its impressive rebound. The biggest news was the stunning drop in the unemployment rate, which declined far more than expected to 8.4% from 10.2% the prior month. For perspective, this is down from nearly 15% in April, but still well above the rate of just 3.5% in February. The unemployment rate is based on a household survey conducted by the Labor Department.

 

By contrast, the component of the report that covers job gains is derived from actual figures provided by larger companies. In August, the economy added a solid 1.37 million jobs in a wide range of industries. Typical monthly readings were for job gains of around 200,000 in 2019. As with the unemployment rate, a lot of progress in recovering lost ground has been made relatively quickly, but there is still a long way to go to restore the jobs lost due to the coronavirus.

 

Another key report released this week also indicated a faster than expected pace of economic recovery. The Institute for Supply Management (ISM) Services Index came in at a solid 56.9, up from a depressed level of just 41.8 a few months ago. Readings above 50 indicate an expansion in the sector, while those below 50 indicate a contraction.

 

Unemployment Rate (%)

 

Week Ahead

September 10 — European Central Bank meeting

September 11 — Consumer Price Index (CPI)

September 16 — U.S. Federal Reserve meeting

September 16 — Retail Sales report

 

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