The big news in a week that didn’t have much of it was the Department of Labor’s Employment Situation Report, the latest of a recent flurry of data showing growing softness in the economy. There were 160,000 new jobs created in April (analysts were expecting 200,000), compared to 208,000 in March. Further, the participation rate, which gained a tenth of a point in March to considerable fanfare, dropped back by two-tenths.
There was good news as well; wages were up by .03% for the month and the year-over-year rate increased by only slightly less. The unemployment rate was unchanged at 5.0%.
It wasn’t a terrible report. Job creation was actually higher than the 150,000 jobs economists expect during a “mature recovery,” a title we presume the current one has aged into by now. But coupled with other data, especially first quarter GPA which fell back to 0.5%, the employment report is making economists a little edgy. All the data and the edginess, as it has for several years, gets pretty quickly boiled down into a single question: What will the Fed do?
When last heard from, a scant two weeks ago, the Federal Open Markets Committee concluded its April meeting with no change in the Fed market rate and with strong signals the issue would be on the table again in June. That now appears open to debate but so far there hasn’t been much. Most comments from FOMC members appear to have coalesced around a “too soon to tell, ask me again next month” approach.
New York Fed President William Dudley, for example, referred to the April job creation numbers as “a touch softer” than expected, but said he was not putting a lot of weight on the data. Other members pointed out they will get to review another month’s worth of all kinds of data before they have to make a decision. Most analysts still expect that, regardless of timing, there will be two rate increases in 2016.
But the only interest rates we really truly care about have eased down even further. Freddie Mac pointed to the disappointing April employment data in noting that 30-year fixed rates have now set a new 2016 low, falling to 3.57%. Last year at this point the rate was 3.85%.
The wave of month-end housing data begins next week with residential construction data. This has been a disappointing spring thus far, so hopefully the April report will show builders getting down to business.