The past week was dominated by employment reports. June payroll growth displayed soft numbers, with private payrolls up 223,000, lower than the expected 230,000 increase, and weaker than the 250,000 gain in May. Wage pressure was also weak in June, with the average hourly earnings remaining unchanged, and the year-over-year rate down 0.3%. The US unemployment rate decreased to 5.3% from 5.5%, likely due to the end of the school year, resulting in many new entrants to the labor market. The strongest sector of the labor market proved to be business services, which displayed a 64,000 rise in jobs in June, followed by a 33,000 rise in retail jobs. Manufacturing and construction jobs remained stagnant.
Challenger reported that layoff announcements came in at 44,842 in the month of June, up from 41,034 in May, and significantly higher than 31,434 in June of last year. The retail sector produced the most layoff announcements in the month.
Opposite of job cuts is the most recent Gallup US Job Creation index, which remained high in June at plus 32. The index score is based on 43% of workers reporting that their employer is hiring and expanding the size of its workforce, along with 11% saying their employer is issuing layoffs and reducing the size of its workforce. The percentage of adults participating in the workforce was at 67.1% in June, up from May’s rate, and is now the highest rate since last September.
Initial jobless claims, although still near 15-year lows, did increase by 10,000 in the June 27 week to 281,000. The 4-week average inched 1,000 higher to 274,750, and is relatively unchanged from a month ago. Continuing claims from the June 20 week rose by 15,000 to 2.264 million and the 4-week average rose by 15,000 to 2.253 million. Both are considered very low readings.
Pending home sales displayed yet another strong report for the housing market as the index increased 0.9% in May, the highest level since 2006. The housing market is most likely being boosted by the stronger jobs market, and the potential for higher mortgage rates seems to be pushing homebuyers into the market.
Consumer confidence continues to rise, with a nearly 7-point increase for the June index to a 101.4 level. Expectations are up 8.2 points to 94.6, reflecting Americans’ optimism over the outlook for jobs and income. Americans are also confident in the present situation of the economy, as that component rose 4.5 points to 111.6. Strong consumer confidence is also reported by the consumer comfort index, which came in at 44.0 in the June 28 week, up from 42.6, 40.9, and 40.1 in the three prior weeks.
Keep an eye out this week for reports on consumer spending, job openings, and the release of the Federal Open Market Committee meeting minutes.
The past week brought minimal mortgage rate movement. Seven out of the ten loan programs we report rate for displayed no movement at all. Both the 20-Year Manufactured Conventional and the 30-Year VA programs showed slight increases, but they rose less than 0.1%. The 15-year Fixed Conventional was the only program to have a rate decrease, dropping 1/8 percent points from 3.500% (3.570% APR) to 3.375% (3.445% APR). The 30-Year Fixed Conventional rate remained at 4.125% (4.165% APR), which is nearly identical to the year-ago rate of 4.125% (4.213% APR).
Chief economist for Freddie Mac, Sean Becketti, commented on current mortgage rate movement:
“Overseas events are generating significant day-to-day volatility in interest rates… The MBA composite index of mortgage applications fell 4.7 percent in response to what is now three consecutive weeks of mortgage rates over 4 percent. Other measures, however, confirmed continued strength in housing — pending home sales rose 0.9 percent, exceeding expectations, and the Case-Shiller house price index recorded another solid increase.”
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