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SOLID JOB GAINS

Ahead of two major economic events, mortgage rates moved higher early in the week.  When there were few surprises in either the Employment report or the ECB announcement, though, mortgage rates recovered some of their losses and ended the week just a little higher. This was the first weekly increase in rates in six weeks.

After slowing over the winter due to unusually severe weather, the economy has seen job gains above 200K over the last several months. This was the first time in 14 years that job gains exceeded 200K for four straight months. Against a consensus forecast of 210K, the economy added 217K jobs in May.

The Unemployment Rate was flat at 6.3%. Average Hourly Earnings, a proxy for wage growth, were a moderate 2.1% higher than one year ago. The May Employment data was right on target with the forecasts in nearly every area.  The European Central Bank (ECB) took a middle of the road approach in easing its monetary policy. After weeks of hinting that further monetary stimulus is
needed to boost economic growth, ECB officials announced a rate cut on Thursday. They also will implement measures to encourage bank lending.  Investors were most interested in hearing about a bond purchase program, but ECB President Draghi essentially just suggested that they were holding this key option in reserve to use in the future if necessary. The ECB stimulus did
cause bond yields around the world to move a little lower. Next week, the biggest report will be Retail Sales, which will be released on Thursday. Retail Sales account for about 70% of economic activity. Before that, the JOLTS report, measuring job openings and labor turnover rates, will come out on Tuesday. The Producer Price Index (PPI) focuses on the increase
in prices of “intermediate” goods used by companies to produce finished products and will come out on Friday. Consumer Sentiment and Import Prices will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.