Weekly Market Recap
(Week ending 06/02/2023)
THE LATEST MORTGAGE INDUSTRY NEWS AND ANALYSIS
Week Ending: June 02, 2023
Updated: June 05, 2023
After rising significantly over the first several weeks of May, mortgage rates declined this week, mostly unrelated to any specific news.
The latest key Employment report contained somewhat conflicting information. The economy added 339,000 jobs in May, far above the consensus forecast of 180,000, and positive revisions raised the results for prior months. Particular strength was seen in professional services, health care, and leisure. By contrast, the unemployment rate unexpectedly jumped from 3.4% to 3.7%, the highest level since October 2022.
While the discrepancy was unusually large this month, it is not uncommon to see the two components of the report diverge in this fashion. The figures for job gains are calculated from data reported by companies, while the unemployment rate is based on a separate survey of individuals. The rise in the unemployment rate this month may reflect a large number of workers who have chosen to seek better opportunities rather than involuntarily losing their jobs. They ultimately may not be out of work for very long, and this data captures just one point in time. Investors will be watching these figures carefully in the coming months to evaluate the underlying trend.
Average hourly earnings, an indicator of wage growth, increased 0.3% from April, matching the consensus forecast. They were 4.3% higher than a year ago, down from an annual rate of increase of 4.4% last month. Fed officials keep a close eye on wage growth because it generally raises future inflationary pressures. Investors are split about whether the Fed will raise the federal funds rate by another 25 basis points at its next meeting on June 14.
Another significant economic report released this week from the Institute of Supply Management highlighted the recent struggles in the manufacturing sector. The ISM national manufacturing index fell to 46.9, and readings below 50 indicate a contraction in the sector. Consumers have shown a preference for services over goods since the reopening of the economy following the pandemic.
Investors will continue to watch for new troubles in the banking sector. They will also see if Fed officials elaborate on their plans for future monetary policy. It will be a light week for economic reports. The ISM national services sector index will come out on Monday, and the Trade Deficit will be released on Wednesday.
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