Investors were focused on Friday's Employment report and the policy on tariffs this week. Despite unexpected results on both fronts, however, there was little reaction in mortgage rates, and they finished the week nearly unchanged.
Against a consensus forecast of 175,000, the economy added just 104,000 jobs in March. In addition, downward revisions subtracted 50,000 jobs from the results for prior months. Even with the shortfall, however, the economy has added an average of 202,000 jobs per month during the first three months of 2018. The unemployment rate was flat at 4.1%.
Average hourly earnings, an indicator of wage growth, slightly exceeded expectations. They were 2.7% higher than a year ago, up from an annual rate of 2.6% last month.
On Thursday, President Trump threatened to add an additional $100 billion in tariffs on Chinese goods on top of the previously announced $50 billion. Chinese officials quickly said that they would respond with proportional measures. Some people think that both sides are just attempting to gain leverage in trade negotiations and that the tariffs will never be imposed. If these actions result in a trade war, though, it likely would have multiple effects. One would be reduced global economic activity, which would be good for mortgage rates, as it would reduce the outlook for future inflation. However, tariffs also raise the price of imported goods, which would increase inflationary pressures. These offsetting factors make the overall impact on mortgage rates difficult to predict.
Looking ahead, the minutes from the March 21 Fed meeting will come out on Wednesday. These detailed minutes provide additional insight into the debate between Fed officials about future monetary policy. The Consumer Price Index (CPI) also will come out on Wednesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.
source: Mortgage Time Newsletter