Unemployment Drops 

This week's major economic data generally was in line with expectations and had little impact. The news that President Trump tested positive for the coronavirus was modestly positive for mortgage markets and negative for stocks. Mortgage rates ended the week with little change near record low levels.

The other key areas of the report also were encouraging. From a level of 8.4% last month, the unemployment rate dropped to 7.9%. In terms of progress on the recovery, this was down from nearly 15% in April, but still well above the rate of just 3.5% in February. Average hourly earnings, an indicator of wage growth, were 4.7% higher than a year ago, up from an annual rate of 4.6% last month.  

The reduced economic activity resulting from the pandemic has caused a decline in inflation, which has helped keep mortgage rates low. In August, the core PCE price index was just 1.6% higher than a year ago, up from an annual rate of increase of 1.4% last month. Core PCE is the inflation indicator favored by Fed officials, and their stated target is 2.0%.

Investors will remain focused on medical advances to fight the coronavirus and negotiations for additional government fiscal stimulus measures. Beyond that, it will be a light week for economic data. The ISM national services index will come out on Monday. The JOLTS report, which measures job openings and labor turnover rates, will be released on Tuesday. Fed officials value this data to help round out their views on labor market conditions. The minutes from the September 16 Fed meeting will come out on Wednesday. These detailed minutes provide additional insight into the debate between Fed officials about future monetary policy and have the potential to move markets.