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JOB GAINS SURGE

The major economic date released this week continued to show an event better than expected bounce back from a weather related slowdown during the winter.  Despite the economic strength, though, there were few signs of inflationary pressures, helping mortgage rates end the week lower, near the best levels of the year.

The economy added 288k jobs in April, far more than expected, and the largest monthly increase since January 2012.  Average job gains over the last three months were a healthy 238K up, from 167K over the prior three months.

The Unemployment Rate unexpectedly dropped from 6.7% to 6.3%, the lowest level since September 2008.  Looking below the surface, though, a large part of the decline in the Unemployment Rate was due to people leaving the labor force.  Average Hourly Earnings, a proxy for wage growth, were flat, limiting the upward pressure on inflation.

The impact of unusually severe winter weather appears to have taken an even bigger bite out of economic activity during the first three months of this year than what had been expected.  The initial reading for first quarter Gross Domestic Product, the broadest measure of economic growth, was just 0.1%, down from 2.6% during the fourth quarter.  This report often receives large revisions, though, as more data is collected.

Next week, ISM Services will be released on Monday. The JOLTS report, measuring job openings and labor turnover, will come out on Friday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. A meeting of the European Central Bank (ECB) on Thursday also may influence US markets. The ECB is considering a bond purchase program similar to the one in the US that is currently being wound down.