I hope everyone had a good Mother’s Day! It was certainly different, but I hope you got a chance to catch up with mom. The first jobs report to show the full breadth of the economic struggle going on in this country as a result of COVID-19 was out last Friday. It wasn’t great, but it won’t be like this forever. We’ll get back to the office and back to stadiums soon enough.
Analysis from Econoday was used in compiling parts of this report.1 It’s a new week, so let’s jump in.
The United States’ trade deficit with other countries increased by $5.6 billion in March to $44.4 billion. This deficit is just slightly wider than consensus estimates. Moreover, there was no good news for exports or imports. On the goods side, the deficit was up $4.6 billion to $65.6 billion. On the services end, the surplus fell by $100 million to $21.2 billion.
Looking at exports, vehicles were down 17.9% in March as manufacturing was shut down. Meanwhile, exports of consumer goods fell 5.2% with capital goods dropping 4.5%. Meanwhile, farming exports were down just a bit. Exports are down 11.9% overall on the year.
Meanwhile, on the import side, these have fallen 10.9% overall on a year-to-year basis. Imports of consumer goods were down 7.7%, with vehicle imports falling 8.9%.
Our trade deficit with China decreased by $4.2 billion to $15.5 billion. However, this reflects an overall downturn in trade more than anything else.
MBA Mortgage Applications
Mortgage applications were up 0.1% overall last week. Purchase applications were up 6% while refinance applications were down 2%. Unfortunately, purchase applications were still down 19% on the year. The average mortgage interest rate was down 3 basis points for a 30-year fixed conventional mortgage at 3.4%.
Initial jobless claims were down 677,000 but still remain at a very high 3.169 million. Further, there are still problems being reported claiming unemployment insurance through overwhelmed state systems, so this number is likely to remain on the high side for a while. The 4-week average of initial claims was down almost 862,000 to 4.174 million.
On the continuing claims side, these were up 4.636 million to 22.647 million. The number of people looking for unemployment were unemployed among those eligible for the insurance was up 3.1% to 15.5%. The 4-week average of continuing claims was up about 3.8 million to about 17.1 million claims.
Well, this is ugly. There were 20.5 million jobs cut from nonfarm payrolls in April. The unemployment rate is listed at 14.7% currently. It would’ve been about 5 points higher than that, but the Bureau of Labor Statistics excluded from this number people who were employed, but absent from work due to the virus. They chose not to classify those who were dealing with virus-related closures as temporarily laid off.
There was also a 2.5% drop in labor force participation as people aren’t actively trying to find work. Average hourly earnings were up 4.7% in April and 7.9% on the year. However, even this isn’t great news. The elimination of many lower paying jobs is pushing up the average. The length of the average workweek stayed the same at 34 hours, 12 minutes across all professions.
Meanwhile there was a decrease of 19.52 million jobs from private payrolls including 1.33 million jobs lost in manufacturing. There were 980,000 jobs cut from government payrolls. There were 7.7 million jobs lost in leisure and hospitality, along with 2.1 million jobs cut from professional and business services. There were additional drops of 2.1 million in both retail and healthcare and social assistance categories. In construction, 975,000 jobs were cut with 262,000 jobs lost in financial activities. Finally, 50,000 miners lost their jobs. With the self-employed and those in the labor force but not on any payrolls included, the total size of the labor force was down 6.4 million to 156.5 million.
Some good news is that mortgage rates remain near historically low levels despite ticking up a bit last week. If you’re in a position to purchase or refinance, you can get started by talking to one of our Home Loan Experts.
The average rates for a 30-year fixed mortgage with 0.7 points paid in fees was up 3 basis points last week to 3.26%. This is still down from 4.1% last year at the same time.
Meanwhile, looking at shorter terms, the average interest rate on a 15-year fixed mortgage was 2.73% with 0.7 points paid, down 4 basis points on the week. Compared to the same time last year, the rate has fallen from 3.57%.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage was up 3 basis points to 3.17% with 0.3 points paid, falling from 3.63% a year ago.
While there can be no denying the employment report was dismal, with states reopening their economies tentatively in steps, investors are betting the worst is over. All three major indexes posted their first weekly gains in 3 weeks.
The Dow Jones Industrial Average finished Friday at 24,331.32 points, up 455.43 points on the day and 2.56% on the week. Meanwhile, the S&P 500 was up 48.61 points Friday to finish at 2,929.8, a week-over-week increase of 3.5%. Finally, the Nasdaq was up 6% after rising 141.66 points Friday to close at 9,121.32.
The Week Ahead
Tuesday, May 12
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, May 13
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, May 14
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, May 15
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’ll be keeping an eye on jobless claims as usual, but also industrial production and inflation numbers if you check out Market Update.
If you’re sick of numbers and rates and need a break from the chaos, May is Meditation Month. We could all use a little calm in our lives right now. Here’s a post on creating a meditation space in your home. Have a great week and stay healthy!
1Important 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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