Weekly Economic Review: Strength in the Labor Market, Mortgage Rates Increase

Posted by Laine Smith on 3/4/16 12:24 PM

Topics: Economy

Several reports covering the labor market were released this week that were stronger than expected. Mortgage rates ended the week a bit higher as the data indicated economic growth and inflation.

Image courtesy of Master isolated images at FreeDigitalPhotos.net

Friday’s February employment report showed the labor market is adding jobs at a respectable, strong rate. Non-farm payrolls increased 242,000 in February versus consensus estimates of only 190,000. Revisions to January and December’s employment report added an additional 30,000. The unemployment rate has remained unchanged at 4.9 percent.

A negative component of the report was average hourly earnings, which dropped 0.1% from January. Year-over-year average hourly earnings are down 3-tenths to 2.2 percent.

The Pending Home Sales Index was disappointing for January as forecasters were calling for a 0.5% gain. The index was down a steep 2.5% with sales dropping in three of the four regions. Year-over-year pending home sales are only up 1.4 percent despite falling mortgage rates and strength in the job market.

Last week in the economy:

  • Mortgage rates (the national average) increased 0.05% (5 basis points).
  • Low mortgage rates continue to drive the strength of the purchase application index, though it did fall 1% in the week of February 26. Purchase applications are still up 27% from a year ago. Refinance applications fell 7 percent in the week.
  • Initial Jobless Claims remain low but did increase in the February 27 week by 6,000 to 278,000.
  • The Bloomberg Consumer Comfort Index fell below 44 for the first time in 2016 to 43.6 in the last week of February.
  • Gallup’s Job Creation Index remained at 29 for a second month. The February index said 41% of workers say their employers were hiring and expanding the size of their workforce. This component of the index is down from summer 2015 but similar to January’s report. Twelve percent of workers said their employers were letting people go and downsizing their workforce. This component has remained consistent over the past year, according to Bloomberg Business.

What's on the economic calendar for the week of March 7, 2016:

Monday: Labor Market Conditions & Consumer Credit

Wednesday: MBA Mortgage Applications

Thursday: Jobless Claims & Bloomberg Consumer Comfort Index

Friday: Import & Export Prices

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