With unemployment at a 16-year low, it's safe to say there are a lot of people putting in an honest day's work, and job growth continues.
Employers added 209,000 new jobs in July, the Bureau of Labor Statistics reported, well above expectations. Revisions to May and June yielded 2,000 more jobs than previously reported. Employment growth has averaged 184,000 new jobs per month this year, in line with the average monthly gain of 187,000 new jobs in 2016. Wage growth was 2.5 percent over the last year, and the unemployment rate fell to 4.3 percent from 4.4 percent in June, the lowest since March 2001.
Home price gains continue. Data analytics firm CoreLogic reported that home prices, including distressed sales, rose 6.7 percent from June 2016 to June 2017, due in part to the continued theme: limited homes for sale on the market. On a monthly basis, prices were up 1.1 percent from May.
Inflation remained tame in June. Personal Consumption Expenditures (PCE), which measures price changes in personal goods and services, is a favorite inflation gauge for Federal Reserve members. Core PCE, which excludes volatile food and energy prices, was in line from May to June at 0.1 percent. Year over year, Core PCE was 1.5 percent, below the Fed's target range of 2 percent.
Remember, inflationary pressures reduce the value of Bonds, like Mortgage Backed Securities. When Bond prices worsen, home loan rates can too. The reverse is also true, meaning low inflation typically benefits Bonds and home loan rates.
At this time, home loan rates remain just above historic lows.
If you or someone you know has questions about home loan products or current rates please contact me. I'd be happy to help.
Forecast for the Week
Wholesale and consumer inflation hasn't been sweeping the nation. Find out where inflation landed in July.
Second quarter Productivity will be released Wednesday.
On Thursday, wholesale inflation from the Producer Price Index will be released along with weekly Initial Jobless Claims.
The Consumer Price Index will be delivered on Friday.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.
When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse.
To go one step further, a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes are on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.
As you can see in the chart below, Mortgage Bond prices improved recently on the heels of tame inflation news, but a strong Jobs Report stopped momentum. Home loan rates are still in historically attractive territory.
Chart: Fannie Mae 3.5% Mortgage Bond (Friday Aug 04, 2017)