Economic update for the week ending August 4, 2018

​157,000 new jobs added in July – The Bureau of Labor Statistics reported that 157,000 new jobs were added in July. This was below the 193,000 expected by analysts, but still a healthy number. In the last 12 months, job gains have averaged 203,000 a month. Wage growth, which is an indicator of inflation risk, showed average hourly wages growing by 2.7% over the past 12 months. The unemployment rate dropped to near historic lows of 3.9%, down from 4% in June. While more wage growth would be nice, 2.7% won’t put much pressure on The Fed to raise rates to combat inflation risks. Usually, with unemployment so low you would see wage growth at 3% or more. Wages have been stubborn to rise, which has kept inflation in check and interest rates historically low–especially with such robust growth.

Strong corporate earnings overshadowed trade fears this week – With over 30% of companies reporting second quarter earnings, this earnings season is turning out mostly positive. Most companies posted results that beat expectations. While Tech stocks sunk last week after Facebook reported disappointing earnings, they soared this week after Apple’s earnings were reported. Apple became the first company to have a valuation of over $1 trillion. China and the U.S. both stepped up tariffs on more products, while The U.S. and The European Union edged toward a trade deal. Trade fears probably are the reason stocks did not rally much higher on such strong earnings. The Dow Jones Industrial Average closed the week at 25,462.08, up slightly from 25,451.06 last week. It is up 3% year-to-date.  The S&P 500 closed the week at 2,840.30, up from 2,818.82 last week. It’s up 6.2% year-to-date. The NASDAQ closed the week at 7,812.01, up from 7,737.43 last week.  It’s up 13.2% year-to-date.

Treasury Bond Yields unchanged this week  –  The 10-year Treasury bond closed the week yielding 2.95%, almost unchanged from 2.96% last week. The 30-year Treasury bond yield ended the week at 3.09%, unchanged from 3.09% last week. We watch bond rates because mortgage rates follow bond rates.

Mortgage rates  slightly higher for the week – The August 2, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.60%, up slightly from 4.54% last week. The 15-year fixed was 4.08%, up slightly from 4.02% last week. The 5-year ARM was 3.93%, up slightly from 3.87%  last week.

Author, 
Syd Leibovitch