Economic Overload: The Weekly Market Update

Big Data Week

Big Data Week

The first week of the month is always busy with data announcements because the employment data is released on the first Friday of the month. But this month we started out firing on all cylinders because we had a meeting of the Federal Reserve’s Open Market Committee the same week, plus April was a short month and some end of the month data was pushed into May. This included personal income and spending, which are key economic indicators.

So how did we make out with all of this data and activity? Personal income and spending came in lower than forecast. The fact that personal spending did not rise at all was certainly of concern because stagnant consumer spending was a major factor contributing to the disappointing preliminary estimate for economic growth in the first quarter, which was released the previous Friday. Spending will likely need to increase for economic growth to pick up.

The announcement from the Fed came on Wednesday and, as expected, there was no action on interest rates. The announcement indicated that the Fed was comfortable with previous statements regarding future activity, despite the slow rate of growth in the first quarter. The Fed did not have the ability to see the employment numbers for April when they met and the release showed that jobs increased by 211,000, slightly more than forecast, though the job creation was partially offset by a downward revision of the previous month’s numbers. The unemployment rate fell to 4.4%, which puts us very close to what economists consider full employment, but does not consider those who are working part time or out of the workforce, which gives us some room to grow before inflation sets in. Wages grew by 0.3%, which was right on forecast. These numbers would support the Fed raising rates in June; however, there will be another jobs report released before they meet again.

The Weekly Market Update

Rates on 30-year fixed loans were steady last week as the markets waited on the jobs data. For the week ending May 4, Freddie Mac announced that 30-year fixed rates fell one tick to 4.02% from 4.03% the week before. The average for 15-year loans remained at 3.27%, and the average for five-year adjustables moved up one tick to 3.13%. A year ago, 30-year fixed rates averaged 3.61%.

Attributed to Sean Becketti, chief economist, Freddie Mac -- "The 10-year Treasury yield remained relatively flat this week, as did the 30-year fixed rate which fell 1 basis point to 4.02 percent. Markets have been erring on the side of caution following a weak advance estimate for first-quarter GDP and the FOMC's broadly expected decision to leave rates unchanged."

Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.