Economic Update August/2016
Economic update for the week ending August 6, 2016
Employers add 255,000 new jobs in July – The Bureau of Labor Statistics reported that U.S. employers added 255,000 net new jobs in July. Expectations were in the 180,000 new jobs range. Job gains had stalled out in the beginning of the year, bottoming out in May when only 24,000 new jobs were created, the worst month since the recovery began. Jobs rebound in June with a revised figure of 292,000 new jobs, one of the best months ever, and now in July with 255,000 new jobs created. July marked 70 straight months of job gains. The only sector that lost jobs in July was oil and mining, as low oil prices have caused companies to cut production. The unemployment rate held steady at 4.9%. Hourly wages also ticked up slightly bringing wages up 2.6% from last July, up from 2.2% for the 12 months ending July 2015. Wages were increasing between 3% and 3.5% annually before the recession.
Stocks rise following strong job gains – NASDAQ and S&P at all time highs – Stocks rose Friday following the announcement of an interest rate cut by The Bank of England and other measures to stimulate the economy in the United Kingdom, and a stronger than expected U.S. new jobs report that showed that employers added 255,000 new jobs in July. Stocks had slid throughout the week. Last Friday’s GDP announcement that the economy grew just 1.2% last quarter weighed on the market early in the week.investors also pulled back due to falling oil prices which slipped to $41 per barrel, after hitting $50 a barrel in June. Oil was $120 a barrel two years ago before beginning a steep slide, bottoming out at $28 a barrel in February. Oil prices had been on the rise until slipping over the past few weeks.The Dow Jones Industrial Average closed the week at 18,543.53, up from 18,432.24 last Friday. The S&P 500 closed the week at 2,182.87, an all time high, up from 2,173.60 last week. The NASDAQ closed the week at 5,221.12, also a record high, up from last week’s close of 5,162.13.
Bond yields rise – Investors moved funds from bonds to stocks pushing rates up. The 10 year U.S. Treasury bond yield closed the week at 1.59%, up from 1.46% last Friday. The 30-year U.S. Treasury bond closed at 2.32%, up from 2.18% last week. Mortgage rates follow bond yields so we watch bond yields closely. Mortgage rates rose with bonds at the end of the week.
Mortgage rates – The Freddie Mac Primary Mortgage Survey released on August 4, 2016 showed that average mortgage rates from lenders surveyed for the most popular mortgage products were as follows: The 30-year fixed rate average was 3.43%. The 15-year fixed average rate was 2.74%. The 5/1 ARM average rate was 2.73%. Rates were about 1/8% higher to end the week, so expect next week’s survey to reflect that.