In this week’s economic review, mortgage rates increased to their highest levels since spring, hiring spiked, and consumer spending and sentiment took some unexpected declines.
Labor Market Conditions Index
While the 222,000 growth of non-farm payrolls was strong for the June employment report, average hourly earnings increased just 0.2 percent. The mixture paved the way for an increase of 1.5 following May’s upwardly revised increase of 3.3. June marks the 13th consecutive month of gains for the index.
While consumer spending has been modest for most of the year, credit card spending increased a sizable $18.4 billion in the month of May. Revolving credit increased by $7.4 billion versus April’s gain of only $1.2 billion. Non-revolving credit, i.e. auto financing and student loans, posted a gain of $11 billion.
Job Openings and Labor Turnover Survey
Hiring spiked in May to its highest level since 2004. After reaching the second highest level on record, job openings fell by 301,000 in the month to 5.66 million, the second lowest level of the year.
Other positives in the report include the quit rate, which increase 0.1 percent to 2.2 percent. This signals worker confidence and their options to switch jobs.
Consumer Price Index
Core CPI increased just 0.1 percent in June, making it one of the weakest 4-month stretches in 60 years of the index. Consumer prices were unchanged for the month as fuel costs declined and food prices remained stable. Year-over-year the core rate is at 1.7 percent with total prices down 0.3 to 1.6 percent.
Consumer spending in June fell unexpectedly by 0.2 percent following a revised 0.1 percent decline in May and a revised 0.3 percent gain in May. Weakness was across the board of all consumer sectors with declines in food & beverage stores, department stores, restaurants and gasoline.
Sentiment fell two points in July’s preliminary report to a much lower-than-expected level of 93.1. The expectations component fell nearly 4 points to 80.2, the lowest reading since fall 2016. The current conditions component increased slightly to 113.2, which sheds some positivity on the month’s consumer activity.
This week in the economy:
- The average 30-year fixed-rate fell 2 basis points as of July 13th, landing at 4.03% with 0.5 points, according to Freddie Mac.
- Purchase applications fell a seasonally adjusted 3 percent in the week of July 7. Refinance applications decreased 13 percent to the lowest level since January 2017, according to MBA Mortgage Applications.
- Initial jobless claims held steady in the week of July 8 with a slight increase of 2,000, according to Bloomberg. The 4-week average inched 2,250 higher to 245,750, slightly above the month-ago trend.
- The Bloomberg Consumer Comfort Index dropped sharply in the week of July 9, landing at 47.0, which is the lowest reading since January 2017.
The economic calendar for the week of July 17th, 2017:
- Tuesday – Housing Market Index
- Wednesday – MBA Mortgage Applications, Housing Starts
- Thursday – Jobless Claims, Bloomberg Consumer Comfort Index
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