Weekly Market Recap

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Week Ending: August 7, 2020

This week’s important economic reports modestly surpassed investor expectations, and the economic recovery has continued to be faster than anticipated. Despite the strong data, though, mortgage rates dropped slightly to fresh record low levels.

Friday’s highly anticipated monthly labor market report revealed that the stronger than expected rebound from the unprecedented job losses caused by the partial shutdown of the economy has continued. In July, the economy added a massive 1.8 million jobs, which was above the consensus forecast for an increase of 1.5 million. For perspective, typical monthly readings were for job gains of around 200,000 in 2019.

The data from other areas of the report were similarly encouraging. The unemployment rate dropped sharply from 11.1% to 10.2%, which was better than the consensus forecast of 10.5%. Average hourly earnings, an indicator of wage growth, unexpectedly rose in July and were 4.8% higher than a year ago. According to the Labor Department, the greatest strength was seen in hospitality, government, retail, business services, and health care.

Two other major economic reports released this week also exceeded expectations. The ISM national services index rose to 58.1, which was well above the consensus forecast of 55.0, and was the highest level since February 2019. Similarly, the ISM national manufacturing index increased to 54.2, the highest level since March 2019. Readings above 50 indicate an expansion in the sector.

Looking ahead, investors will continue watching for news about medical advances, government stimulus programs, Fed monetary policy changes, and plans for reopening the economy. Beyond that, the Consumer Price Index (CPI) will come out on Wednesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales will be released on Friday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth.

Copyright @ 2020 MBSQuoteline

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