Economic update for the week ending September 5, 2015
Economy adds 173,000 net new jobs in August- The Labor Department Reported that the economy added 173,000 new non-farm jobs in August. This was below the 220,000 jobs expected. The unemployment fell to 5.1%, its lowest level in 7 years. That is down from 5.3% last month and has dropped nearly in half since peaking during the recession. The most positive part of the report was that wages, that have been stagnant, rose 8 cents an hour in August following a 6 cent an hour rise in average wages in July. This was welcome news after June’s number showed that the April, May, June quarter had the lowest wage growth in over 30 years. August’s figure shows wage growth of 2.2% over the last 12 months, which is well over the inflation rate.
Stocks down again this week – Fears of China’s slowdown and a possible interest rate hike by the Fed spooked the markets. More bad economic data from China showed their economy slipping further. At the same time U.S. G.D.P. rose 3.7%, which was better than expected. The August jobs number showed fewer new jobs than expected, yet the unemployment rate fell to near pre-recession levels, and wages, which have been stagnant, rose more than expected. Auto sales were strong, another sign that U.S. consumers are spending money. The Federal Reserve Beige Book, the Fed’s assessment of the strength of the economy, showed that they felt that the economy was growing at a “modest to moderate pace” and that the Chinese slowdown is havering a “only a moderate affect on the U.S. economy.” This again got investors fearing an interest rate hike by the Fed. Some fear that the first rate hike since 2006 could happen as soon as it’s September 16th – 17th meeting. This was also a drag on stocks. The Dow Jones Industrial Average closed the week at 16,102.38, down from last week’s close of 16,643.01. The S&P 500 closed the week at 1,921.22, down from last Friday’s close of 1,988.87. The NASDAQ closed the week at 4,683.92, down from last week’s close of 4,828.33.
Mortgage rates remain near lows for the year – The 30 year fixed rates ended the week around 3.875% for loans up to $417,000, and around 4.00% for loans over $417,000. The 15 year fixed rate loans are about 3.25% for loans up to $417,000, higher loan amounts have rates that are around 3.375%. The 5 Year-ARM rate is around 2.75% and 1 Year-ARM mortgages are about 2.50%.
Treasury Bond yields rose from lows early in the week and closed higher than last week – Investors bought stocks and pulled money from the safety of U.S Treasury Bonds pushing yields up from Monday’s lowest point in over a year. The 10 year Treasury bond yield closed week at 2.13%, almost unchanged from 2.19% last Friday. The 5 year was under 2% at one point on Monday. The 30 year treasury bond yield closed Friday at 2.89%, down slightly from last week’s close of 2.92%.
U.S. Bank’s earnings rise – The FDIC reported that profits from U.S. Banks rose 7.3% in the second quarter of 2015. The number of “problem banks” continued to fall. Only 5.6% of all banks were not profitable. This was by far the most healthy banks have been since the financial crisis which began in 2007.
Factory orders higher – Orders from U.S. Factories posted a modest gain in July according to The Commerce Department. Factory orders were up 0.4% in July. This was not as good as June’s 2.2% increase, but it did build on that increase.
Have a great holiday weekend!