Job Gains Fall Short

The major economic data released this week fell well short of expectations, capped by Friday's disappointing labor market report. As a result, mortgage rates ended the week lower.

Another notable component of the report was average hourly earnings, an indicator of wage growth. In April, earnings rose 0.7% from March, which was far above the consensus forecast for just a slight increase. However, they still were only 0.3% higher than a year ago, down from an annual rate of increase of 4.2% last month. The rapidly shifting proportion of higher paying and lower paying jobs in the U.S. has made average wage growth highly volatile in recent months. 

A couple of other significant economic reports released this week from the Institute of Supply Management (ISM) also fell short of the forecasts. The ISM national manufacturing index unexpectedly dropped to 60.7, well below the consensus forecast of 65.0. Similarly, the ISM national services index fell to 62.7, below the consensus of 64.0. While these two reports did not meet the elevated expectations of investors, levels above 50 indicate that the sectors are expanding, and both reports remained quite strong by historical standards.

Looking ahead, investors will continue watching global Covid case counts and vaccine distribution. 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 over two-thirds of U.S. economic activity, the retail sales data is a key indicator of growth.