A wide range of events influenced mortgage rates this week, including important labor market data, a European Central Bank meeting, and government policy changes. Some were positive and some were negative. The net effect was mortgage rates finished the week higher.
An upside surprise in job gains in Friday's Employment report was negative for mortgage rates, but weaker than expected wage growth limited the damage. Against a consensus forecast of 205,000, the economy gained an enormous 313,000 jobs in February, the largest total since July 2016. In addition, upward revisions added 54,000 jobs to the results for prior months. Construction firms added 61,000 workers, the highest monthly increase in nearly 11 years.
Partially offsetting the strong job gains was a shortfall in wage growth. Average hourly earnings were 2.6% higher than a year ago, down from an annual rate of 2.8% last month, and well below the consensus of 2.9%.
Also notable in the Employment data was that the unemployment rate was flat at 4.1% for the fifth straight month, which was above the consensus for a decline to 4.0%. However, this was viewed as an indicator of strength because the higher reading was due to a massive 806,000 people entering the labor force in a sign of confidence in the labor market.
Last week, President Trump took a firm stance on imposing global tariffs on all steel and aluminum imported into the U.S. Uncertainty about how other countries would react caused investors to shift to safer assets, which was good for mortgage rates. However, following resistance from many top political leaders and economists, Trump eased his stance this week, which was mildly negative for mortgage rates.
Thursday's European Central Bank (ECB) meeting contained good news for mortgage rates. Although the ECB set the stage to wind down its bond purchase program, this was not a surprise to most investors. Overall, the comments from ECB President Draghi were viewed as a little more dovish than expected, meaning in favor of a slower pace of tightening monetary policy. As a result, global bond yields declined on Thursday, including U.S. mortgage rates.
Looking ahead, The Consumer Price Index (CPI) will come out on Tuesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales will be released on Wednesday. Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. Housing Starts will come out on Friday. In addition, there will be Treasury auctions on Monday and Tuesday which could influence mortgage rates.
source: Mortgage Time Newsletter