Economic update for the week ending March 10, 2018

313,000 new jobs added in February – Wage growth moderates – The Department of Labor Statistics reported that U.S. employers added 313,000 new jobs in February. It was the economy’s largest monthly gain in jobs since July 2016. This crushed analysts’ expectations of 203,000 new jobs. The unemployment rate remained unchanged at 4.1% for the fifth straight month. Wage growth moderated and rose by just 2.6% from last February. Wages, which have been pretty stagnant for several years, rose by an unexpected 2.9% year-over-year in January. Experts have been puzzled as to why wages are not growing at a faster pace. Higher wage growth would be expected in an economy that has reached what is considered full employment. January’s 2.9% led investors to believe that wages were finally on the rise at more healthy levels, which The Fed targets at around 3%. Rising wages gives people more money to spend which leads to more inflation. Higher inflation drives interest rates up. Inflation has also been below The Fed’s target rate. After the January wage growth of 2.9% was announced, interest rates rose as investors felt inflation was about to pick up to more normal levels. Wages were the most anticipated part of the jobs report this month, as investors wanted to see if January’s wage growth was an outlier, or the start of a trend. Today‘s report suggests that January’s 2.9% may have just been an outlier, not a trend. Everybody will now have to wait until March’s jobs numbers, which will be released the first Friday of April to see if wages are finally rising at more normal levels.
Stock markets end week up 3.5% – Stocks rose this week making up the losses suffered last week after President Trump announced that he was going to place tariffs on steel and aluminum imports to help American metal manufacturers. Thursday, President Trump excluded Canada and Mexico from steel and aluminum tariffs. This was a deviation from last week’s pledge of tariffs on all steel and metal  imports. With almost all companies reported, 75% of companies reported that their fourth quarter profits beat expectations. 313,000 new non-farm jobs were added to the economy in February. That exceed expectations by over 100,000! Wage gains, which scared the markets in January, moderated in February reducing the risk of inflation. The Dow Jones Industrial Average closed the week at 25,335.74, up from last week’s close of 24,538.06. It is up 2.5% year-to-date. The S&P 500 closed the week at 2,786.57, up from 2,692.25 last week. It’s up 4.2% year-to-date. The NASDAQ closed at 7,569.81, up from 7,257.87 last week. It is up 9.5% year-to-date.

Treasury Bond Yields –  The 10-year treasury bond closed the week yielding 2.90%, up slightly from 2.86% last week. The 30-year treasury bond yield ended the week at 3.16%, up slightly from 3.14% last week. We watch bond rates because mortgage rates follow bond rates.
Mortgage Rates slightly higher this week – The March 8, 2018 Freddie Mac Primary Mortgage Survey reported that the 30-year fixed mortgage rate average was 4.46%, up slightly from last week’s 4.43%. The 15-year fixed was 3.94%, up from 3.90% last week. The 5-year ARM was 3.63%, down from 3.62% last week.

Author, 
​Syd Leibovitch