ONLY 75,000 NEW JOBS: For the month of May, only 75,000 new jobs were added to the economy, a record 104th straight month of gains. This was well below general expectations. The unemployment rate remained the same at 3.6%. So far, the economy has added 820,000 new jobs through May of 2019. At this time last year, that number was 1.149 million. Average hourly earnings increased by 6 cents to $27.83, a 3.1% increase over the year. This report backs the growing narrative of an economy that is “still growing but losing momentum”.
MARKETS ROAR: U.S. markets enjoyed their best week in more than six months. On Tuesday, Federal Reserve Chair Jerome Powell said that the central bank would “act as appropriate to sustain the expansion.” This signaled to the investing world that if data indicates a slowing economy, the Fed will cut interest rates. That began the rally, and on Friday when the disappointing jobs numbers were announced, investors seemed downright giddy about this potentially pushing the Fed toward an actual cut. Now we all wait for the July meeting of the Federal Reserve to see what they actually do, and how the markets will respond. Of course, trade issues will continue to move markets this summer. It is not likely much will occur between the U.S. and China before the heads of state meet later this month. After the close of trading on Friday, the U.S. and Mexico indicated that they had reached a deal to avoid a threatened tariff.
YIELDS ON U.S. BONDS FALL: When investors get nervous, they run to safety, and U.S. bonds are the safe bet many choose. As a result, when demand is high, prices rise to get these bonds. This causes yields to fall. If you pay more for the bond that has an existing interest rate, the actual return you will get (yield) falls. The average yield on a 10-year Treasury note dropped to 2.085% from 2.124%, its lowest figure since September 2017. The yield on the two-year decreased to 1.853% from 1.881%. The jobs figures had a lot to do with these falling yields. Trade tensions have also contributed.
MORTGAGE RATES STILL DROPPING: According to Freddie Mac, the average 30-year fixed-rate mortgage dropped to 3.82%, down from 3.99%. That is the sixth straight week of declines and the lowest level since September 2017.