The Tigers had a good weekend. I also ventured out to a wedding, so it was nice to see that some things are still normal. While we take halting steps forward, things are moving on, which is a positive.
In the economy, things are progressing slowly, but they’re getting better.
Today’s report was put together with assistance from Econoday.1 Let’s get into what happened!
ISM Manufacturing Index
Manufacturing grew at a slightly faster pace in July up from 52.6 in June to settle at 54.2. As a reminder, numbers above 50 indicate growth. This beat the estimates of analysts.
New orders were up better than 5 points to come in at 61.5. Meanwhile, production was also up almost 5 points at 62.1. This is a good sign for future employment. However, that’s the one area in which strength didn’t show up with the index number falling more than 2 points to 42.1.
Back to positives, backlogs exports and input prices were also higher. It would be nice to see jobs numbers pick up, but this is fairly positive.
MBA Mortgage Applications
Overall mortgage applications were down 5.1% with purchase applications down 1.8% on the week and refinance applications down 6.8%.
This happened despite the fact that the average 30-year fixed mortgage rate was down 6 basis points to 3.14% last week, a new record low for this index.
The good news is part of this short-term drop in applications has to do with the incredible number of people who are been taking advantage of low rates recently. Refinance applications are up 84% from the same time last year and applications to buy homes have risen 22% on a year-to-year basis.
The overall U.S. trade deficit for June was down $4.1 billion to $50.7 billion. Exports were up 9.4% while imports picked up 4.7%. Overall international trade is still on the slow side with exports down 24.4% and imports falling 19.9% since last year.
Vehicle exports were up and there was a $600 million rise in imports of civilian aircraft. On the import side, nonmonetary gold imports were down $5.9 billion while cell phone and computer imports were up along with vehicles.
Meanwhile, the overall deficit on the goods side is $72.2 billion. On the services end, the U.S. maintains a surplus of $21.5 billion in trade with other countries, up to $100 million in June.
Initial claims for unemployment benefits last week were 1.186 million. This is down 249,000 from the week prior, though still incredibly high. The 4-week moving average of initial claims was down 31,000 to settle at about 1.338 million.
The unemployment rate fell to 11%, which is down 0.6% from the week prior. Continuing claims fell 844,000 to 16.107 million. Meanwhile, the 4-week average of continuing claims dropped 413,250 to about 16.628 million.
The monthly jobs report beat expectations in July with 1.763 million jobs added to nonfarm payrolls. The unemployment rate decreased to 10.2% from 11.1%. There were 1.462 million jobs added to private payrolls while the government added 11,000 jobs.
Looking at jobs by sector, 26,000 jobs were added in manufacturing while there were 592,000 jobs added in leisure and hospitality, 258,300 added in retail trade and 215,000 added in education and health services. Finally, 143,700 temporary jobs were added as employers ramp back up.
On the downside, the labor force participation rate did drop 0.1% to 61.4%. Fewer people are looking for work right now, which doesn’t show confidence.
Meanwhile, average hourly earnings were up 0.2% and have gone up 4.8% on the year. Finally, the average workweek was 6 minutes shorter than the prior week at 34 hours, 30 minutes among all employees across nonfarm payrolls.
Mortgage rates experienced another steep drop last week, hitting new record lows according to Freddie Mac. If you’re in the market for a mortgage, it’s a pretty good time to get started if you have the resources. Feel free to speak with one of our Home Loan Experts!
The average rate on a 30-year fixed mortgage was down 11 basis points to 2.88% with 0.8 points paid in fees. This has fallen from 3.6% at the same time a year ago.
Meanwhile, looking at shorter terms, the average rate on a 15-year fixed mortgage with 0.8 points paid fell 7 basis points to 2.44%, down from 3.05% last year.
Finally, the average rate on a 5-year treasury-text, hybrid adjustable rate mortgage (ARM) with 0.4 points paid fell 4 basis points to 2.9%. While it’s down from 3.36% last year, it just doesn’t make a ton of sense for anyone to get an ARM right now because it’s cheaper to get a 30-year fixed mortgage.
From a purely self-interested perspective, the biggest news in the stock market last week was the fact that Rocket Companies went public. That’s exciting, but it’s also the only thing we’ll say about it here for the sake of preserving editorial integrity going forward. As always, before deciding what investments might be right for you, feel free to consult a financial advisor.
In terms of the broader market, all eyes were on the employment and manufacturing reports as well as ongoing negotiations related to economic relief from the COVID-19 situation.
On that front, the president signed a series of executive orders over the weekend aimed at providing relief while negotiators were at an impasse. Measures included a federal payroll tax holiday, extended federal unemployment benefits, an extension of student loan payment deferrals through the end of 2020 and a lengthening of the federal moratorium on evictions.
There may be some legal challenges on some of this, particularly around provisions that require funding to be appropriated by Congress. We’ll be following it.
On Friday, the Dow Jones Industrial Average was up 46.5 points to close at 27,433.48, up 3.8% over the previous 5 days. Meanwhile, the S&P 500 rose 2.45% on the week after finishing up 2.12 points on the day to close at 3,351.28. Finally, the Nasdaq closed at 11,010.98. This was a weekly increase of 2.47%, despite being down 97.09 points on the day.
The Week Ahead
Tuesday, August 11
Consumer Price Index (CPI) (8:30 a.m. ET) – The consumer price index measures changes based on the price of a fixed basket of goods and services purchased by consumers.
Wednesday, August 12
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
Producer Price Index (PPI) (8:30 a.m. ET) – The Producer Price Index measures the average change over time in prices received by domestic producers for the sale of goods and services.
Thursday, August 13
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The 4-week moving average of new claims smooths out weekly volatility.
Friday, August 14
Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.
Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.
Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.
Next week, we get some key inflation data as well as retail sales and a measure of production from the Federal Reserve. It’ll all be covered in next week’s Market Update!
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1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.
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