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06/07/2017
Market Update

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The U.S. economy added 138,000 jobs in May, well below the forecasted 185,000, while figures from March and April were revised lower. Unemployment declined by 0.1% to 4.3%, mostly due to a drop in the labor-participation rate. Average hourly wages inched up by 0.2% for the month and by 2.5% year over year. The softening of jobs data may cast doubt on the economy’s ability to absorb two more interest-rate hikes this year.
This Week
  • The U.S. economy added 138,000 jobs in May, well below the forecasted 185,000, while figures from March and April were revised lower. Unemployment declined by 0.1% to 4.3%, mostly due to a drop in the labor-participation rate. Average hourly wages inched up by 0.2% for the month and by 2.5% year over year. The softening of jobs data may cast doubt on the economy’s ability to absorb two more interest-rate hikes this year.
  • Initial jobless claims increased by 13,000 to 248,000 in the week ending May 27, the largest increase since mid-April. The four-week moving average (considered a more reliable gauge of unemployment) rose by 2,500 to 238,000. Continuing claims for the week ending May 20 eased by 9,000, while the four-week moving average of continuing claims fell by 16,000 to a 43-year low of 1.915 million.
  • The trade deficit widened to $47.6 billion in April from a revised $45.3 billion in March. Imports climbed by 0.8% on increased demand for capital goods; while exports contracted by 0.3%, partly driven by fewer autos and consumer-goods shipments. An expanding trade deficit drags down economic growth.
  • The Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) slightly gained in May, particularly within new orders, production and employment. A similar report from Markit, however, showed slowing expansion within manufacturing.
  • Personal incomes improved by 0.4% in April, and consumer spending—a primary driver of economic growth and an indication of consumer confidence—rebounded by 0.4% from stagnant firstquarter levels. Personal consumption expenditures (the Federal Reserve’s preferred inflation measure) moved 1.7% higher year over year, but remained below the central bank’s 2% target— raising concerns that the recent uptick in prices may not last.
  • The S&P CoreLogic Case-Shiller Home Price Index reached a 33- month high in March, climbing by 0.9% for the month and by 5.9% year over year. Housing demand continued to outpace available inventory as homeowners choose to remain in their current homes.
  • Mortgage-purchase applications slid by 1% in the week ending May 26, as affordability continued to be an issue for new homebuyers. Refinancing dropped by 6%, as existing homeowners declined to take advantage of rates that remained low.
  • Eurozone producer prices were unchanged in April, as weak energy prices offset gains elsewhere; however, prices expanded by 4.3% year over year—the second fastest 12-month improvement in almost four years.
  • Economic growth in China remained cool in May, according to the PMI composite reading; a drop in production offset a slight increase in new-order growth.
  • Japan’s PMI composite improved in May, as manufacturing activity remained in expansion territory for the ninth consecutive month. 

 

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