Strong Job Gains, Wages Stagnant
Friday’s Employment report showed that job gains remained strong, with the economy adding 242K jobs in February. The economy has added an average of 228K jobs per month over the last three months. The Unemployment Rate remained at 4.9%, as expected.
However, average hourly earnings, an indicator of wage growth, disappointed with a slight decline. After a concerning rise in wages in January, the decline in February was good news for mortgage rates and partially offset the negative effect of the strong job gains.
The February ISM national manufacturing survey released on Tuesday indicated that things may be turning a little more positive for this sector. For mortgage rates, one component of the survey was concerning. The prices paid component measures the change in the prices that manufacturers charge. In February, the survey on prices paid revealed a much higher reading than was expected, hinting at rising inflation. Mortgage rates are highly influenced by the outlook for future inflation. As inflation expectations rise, so do mortgage rates.
Overall, the data suggested that U.S. economic growth and inflation were a little stronger than expected. As a result, mortgage rates ended the week higher.
Week Ahead
Factors: The biggest event of the week will be the European Central Bank (ECB) meeting on Thursday. It is expected that the ECB will announce additional stimulus measures, which could include an expansion of its bond purchase program.
Volatility: Moderate
Trend: Higher
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