Economic update for the week ending May 7, 2022

The U.S. economy added 428,000 new jobs in April - The Department of Labor and Statistics reported that 431,000 new jobs were added in April. The unemployment rate held steady at 3.6%. The labor-force participation rate (the share of workers with a job or actively looking for a job) dropped to 62.2% in April, down from 62.4% in March. It is well below the 63.6% level before the pandemic and has moved up steadily until April. Average hourly wages increased 5.5% from April 2021. There are also a record number of open jobs.

Stock markets ended a wild week slightly lower – It was a wild week for stock markets. Wednesday marked the stock markets' largest increase of the year, and the Dow gained almost 1,000 points following the Fed’s decision to raise their key interest rates by .5%. Some felt that a .75% increase was possible. Fed comments also were encouraging. Fed Chairman Powell appeared to rule out any .75% rate hikes and emphasized that he felt the economy could have a soft landing. He also said that the Fed could slow an overheated economy and tamper down inflation without causing a recession. Unfortunately, on Thursday stock markets had their worst day of the year as investors began to reassess the Fed comments and the Dow lost over 1,000 points. Stock markets had their best day of the year on Wednesday, and the worst day of the year on Thursday. Investors are trying to evaluate the future of inflation and how high-interest rates will get in order to bring inflation down to healthy levels, and whether higher rates could lead to a recession. Experts blame the $5 trillion in pandemic relief stimulus for overheating the economy. They feel that stimulus saved the economy, but that the amount exceeded what was needed. A stellar April jobs report was released on Friday. While more people working and higher wages are great for the economy, they also lead to higher consumer spending which causes inflation. The strong job growth in April did not help stock markets because so far rate hikes and other tightening measures taken by the Fed have not slowed the torrid pace of job growth.

  • The Dow Jones Industrial Average closed the week at 32,899.37, down 0.2% from 32,977.21 last week. It is down 9.5% year-to-date.

  • The S&P 500 closed the week at 4,123.34, down 0.2% from 4,131.93 last week. The S&P is down 13.5% year-to-date.

  • The NASDAQ closed the week at 12,144.66, down 1.5% from 12,334.64 last week. It is down 22.4%, year-to-date.

U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 3.12%, up from 2.89% last week. The 30-year treasury bond yield ended the week at 3.23%, up from 2.96% last week. We watch bond yields because mortgage rates often follow treasury bond yields.

Mortgage rates – Home mortgage rates have continued to increase. Freddie Mac Primary Mortgage Survey reported that mortgage rates as of May 5, 2022 for the most popular loan products were as follows:

  • The 30-year fixed mortgage rate was 5.27%, up from 5.10% last week.

  • The 15-year fixed was 4.52% up from 4.40% last week.

  • The 5-year ARM was 3.96%, up from 3.78% last week.

Initial Jobless Claims

For the week ending April 30th, initial jobless claims rose to 200k from the prior week's revised level of 181k (orig. 180k). Continuing claims, which lag by a week, fell -19k to 1.384mln from a prior 1.403mln. This is the lowest count now for continuing claims since January 1970. The 4-week moving average on headline claims moved back up to 188k, while the 4-week moving average for continued claims is at 1.417mln.

Construction Spending

Construction Spending for March rose .1%, to a seasonally adjusted rate of $1.730.5bln, while February's numbers were revised to $1.728.6bln. Looking year over year in March, total construction spending was up 11.7%. Within the report, private construction grew by .2%, with residential construction up 1.0% and nonresidential up 1.2%. Public construction declined by -.2% in March, with educational down -.8%, and highway down -.4%

ISM Manufacturing PMI

The ISM Manufacturing PMI fell from 57.1 in March to 55.4 in April. Seventeen out of the 18 measured industries reported growth, however, with the only exception being petroleum and coal products. New orders fell -.3% on the month to 53.5, down -8.2 points in the past two months and now the lowest point since May 2020. Production also dropped by -.9%, the weakest since that same time frame. Employment declined by -5.4 points to 50.9, now at its lowest since last September, while inventories fell -3.9 points to 51.6, their lowest since last July. Supply chain issues have once again become a dominant factor in respondent comments, though one noted some improvement (in the Transportation Equipment industry). A couple respondents also highlighted the effects of COVID-related lockdowns in China.

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