Strong Labor Market Data 

The latest labor market data was stronger than expected nearly across the board. Despite the upside surprise, though, mortgage rates ended the week slightly lower.

In contrast to the strong January Employment data, the latest JOLTS (job openings and labor turnover rates) report, covering the month of December, fell far short of expectations. At the end of December, there were just 7.6 million job openings, well below the consensus forecast of 8.0 million and the fewest since September. The ratio was about 1.1 openings for each available worker, down from a peak of over 2.0 in early 2022, and in line with the levels seen prior to the pandemic. A smaller number of openings suggests that companies face less pressure to raise wages to hire enough workers.

Two other significant economic reports released this week by the Institute of Supply Management revealed one miss and one beat. The ISM national services sector index fell to 52.8, below the consensus forecast. Conversely, the national manufacturing index increased to 50.8, exceeding expectations and the highest level since September 2022. Readings above 50 indicate an expansion in the sector and below 50 a contraction. While service companies have been outperforming manufacturers in recent months, these reports suggest that the gap may be narrowing.

Investors will continue to look for additional guidance from Fed officials on their plans regarding future monetary policy. For economic reports, the main event will be CPI on Wednesday. The Consumer Price Index (CPI) is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. Retail Sales will be released on Friday. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of the economy.