There was an actual sporting event in Detroit this weekend. Bryson DeChambeau provided some post Fourth of July fireworks on Sunday winning the second annual Rocket Mortgage Classic with a score of 23 under par. We look forward to having golf fans back at the Detroit Golf Club next year.
The action of the tournament certainly beat my expectations. In that way, it was much like the June employment report. That’s right! I’m not sure what this says about me as a writer, but I can transition to economics just like that!
Headline News
Econoday contributed analysis that helped with several sections of this report.1 Let’s get into it!
Pending Home Sales Index
Pending home sales were up 44.3% to 99.6. This was far better than the expected 11.3% uptick and points to good things for June home sales. The report from the National Association of REALTORS® also says that listings were up. More supply is great news for buyers.
S&P CoreLogic Case-Shiller HPI
Prices were up 0.3% on a seasonally-adjusted basis in the month of April. Prices have risen 0.9% for the month overall and have risen 4% year-to-year, which represents a significant appreciation uptick. It’s the best pace for home value increases since December 2018.
It is worth noting that at least part of these value increases may come down to the fact that people were taking their home off the market in April in order to wait out COVID-19, so this will be something to keep an eye on either way.
Consumer Confidence
Consumer confidence was up 12.2 points overall to come in at 98.1 in June. This beat consensus expectations for an index level of 90. It is noted in here that the end date for the data in this report was June 18, so there’s no accounting for the resurgence of COVID-19, particularly across the South and West.
The present situation component was up almost 18 points to 86.2. Fewer people reported jobs were hard to get at 23.8% compared to 29.2% in May. Meanwhile, more people said jobs were plentiful at 20.8% compared with 16.5%.
Expectations for the future were also up better than 8 points to 106. Fewer people expect to lose their job in the next 6 months with the number who anticipated job losses coming at 14.2% compared to 19.9% last month. However, this is slightly tempered by the fact that a smaller number saw more jobs ahead at 38.4% compared to 39.5% in June.
In terms of buying plans, more people expect to buy a home in the next 6 months with the number at 6.5% of those surveyed. People appear to be realizing they need more or less space based on their time indoors over the past several months. Meanwhile, 11.7% of survey takers plan to buy a car, which is down from where the number usually is in this reading.
Finally, when looking at expectations for the stock market, 42.3% of people see it going up in the near future while 28.6% expect the market to continue dropping in the near future.
MBA Mortgage Applications
Overall mortgage applications were down 1.8% as the purchase index fell 1% and refinance applications were down 2%. The average 30-year conventional mortgage came in at a rate of 3.29%. Low rates have helped drive a 15% year-to-year uptick in purchase applications, so the housing market has been pretty strong on that front.
ISM Manufacturing Index
There’s been a rise in infections over the past several weeks in parts of the country, so it remains to be seen how sustainable this is, but there was manufacturing growth in June. The index came in at a level of 52.6 compared to 43.1 in May. As a reminder, an index level of 50 is considered the breakeven point for growth.
Taking a look at the good news, new orders came in at 56.4, with production at 57.3. The price of inputs used to manufacture were also up better than 10 points at 51.3. This signifies that there’s more market demand.
However, it appears there continue to be manufacturing layoffs. The pace has slowed down with the index level at 42.1 compared to 32.1 in May, but it’s still happening. Also, backlogged orders are down at 45.3. New export orders also continue to fall at 47.6. Foreign demand for American goods just isn’t where it needs to be right now.
Employment Situation
For context, it’s important to understand that the employment report is a snapshot. It’s always based on the second week of the prior month and doesn’t take into account the fact that some states have had to pull back on reopening plans given the movement of this virus. However, there can be no denying that what was shown in that snapshot was very positive.
There were 4.8 million jobs added to nonfarm payrolls in the month of June, well above consensus estimates for 3 million added jobs. This brought the unemployment rate down 2.2% to 11.1%, which is still very high particularly in the context of unemployment rates that were as low as 3.5% as recently as February.
Continuing with the top line numbers, 4.767 million jobs were added to private payrolls with 33,000 jobs being added in the government sector. The labor force participation rate picked up 0.7% to 61.5%.
There are some signs that things are tentative because people are making less money with average hourly earnings down 1.2%, still up 5% on the year. In addition to making less money per hour, people were also working less hours as the length of the average workweek was down 12 minutes to 34 hours, 30 minutes.
Taking a look at individual sectors, retail added 739,800 jobs, while leisure and hospitality added 2.088 million positions. It’s worth noting that these are two of the sectors hardest hit by the ongoing COVID-19 situation. There were 474,900 jobs added to health care and social assistance.
In the closely tracked manufacturing sector, 356,000 jobs were added including 195,800 jobs in vehicle production. In construction, 158,000 jobs were filled. Mining, however, saw cuts of 10,000 jobs.
It’ll be interesting to see July numbers given some of the reopening being paused or pulled back altogether depending on the state.
International Trade
The U.S. trade deficit increased by $5.2 billion in May to come in at $54.6 billion. Overall trade continues to be down in the United States and across the world.
On the export side, these were down 31.8% compared to February and have now fallen 32.1% compared to last May. There were big declines in auto exploits, as well as agriculture, industrial supplies and capital goods. However, perhaps even more worrisome is a downturn in services exports, where America traditionally runs a good-size surplus. There were downturns in demand for our business and financial services as well as intellectual property.
On the import side, these have fallen 24.6% on the year and 19.2% compared to February. Auto imports were down $4.4 billion alone and capital goods imports fell. There’s just less business investment as everyone is kind of in a holding pattern.
Jobless Claims
Initial jobless claims continue to fall, but maybe not at the business many would hope for. They’re still at a very elevated 1.427 million as of last week, a decline of 15,000 claims. The 4-week moving average was down 117,500 at about 1.504 million.
On the continuing claims side, these were up 59,000 to settle at 19.290 million. This is disappointing for those expecting employment to recover quickly. Meanwhile, the unemployment rate was 13.2% in this reading. Finally, the 4-week average of continuing claims fell 494,500 to 19.854 million.
Mortgage Rates
Mortgage rates once again fell to record lows last week. If you’re in the financial position to do so, there’s no better time to lock your rate if you’re looking to purchase or refinance. To get started, talk to one of our Home Loan Experts.
The average rate on a 30-year fixed mortgage with 0.8 points paid in fees was 3.07%, down six basis points on the week, according to Freddie Mac. This has fallen from 3.75% a year ago.
Looking at shorter terms, the 15-year fixed with 0.8 points paid came in at 2.56%, falling three basis points on the week and down from 3.18% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.3 points paid fell 8 basis points to an even 3%, which is also down from 3.45% in July of last year.
Stock Market
The employment report was better than expected, which increased investor confidence in the market overall and led to gains. Although performances of individual indexes have been more than a little uneven, the Nasdaq closed at a new record high. Meanwhile, Boeing actually had some rare good news, having completed recertification flights for its troubled 737 Max jet.
The Dow Jones Industrial Average closed Friday up 92.39 points at 25,827.36, up 0.32% on the week. Meanwhile, the S&P 500 was up 1.5% for the same period after finishing up 14.15 points Friday at 3,130.01. Finally, the Nasdaq was up 4.62% on the week, closing at 10,207.63, up 53 points Friday.
The Week Ahead
Wednesday, July 8
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.
Thursday, July 9
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, July 10
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.
In contrast to last week, this is a light week in terms of economic reporting. Still, we’ll have it all covered for you in next week’s Market Update!
If your brain is like mine and hasn’t fully kicked into gear, you may not be ready to deal with all this economic data. I get it! The good news is we’ve got plenty of home, money and lifestyle content to share with you if you subscribe to our mailing list below.
One thing I can’t wait for his baseball to come back, and the schedule for the shortened season is set to be released today. Here’s an article I still can’t believe I was allowed to write on baseball fan caves for those of you who might be interested. Have a great week, and I’m going to sneak in a go Tigers!
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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