Employment Report Sputters Even as Manufacturing Soars – Market Update


For all intents and purposes, baseball season is over in Detroit and we’ve moved on to football. Here’s hoping your team won last week and got off to a good start.
It’s certainly early for September economic data, but manufacturing numbers came in better than expected, but the number of jobs added was below consensus. Let’s jump right into the data.
Headline News
International Trade in Goods
The nation’s goods gap increased by $1.1 billion in July to $65.1 billion. Imports fell 0.3%. Demand for foreign vehicles was down 2.8% and industrial supply demand fell 1.7%. Unfortunately, exports fell 1.3% as well. Vehicle exports were down, as were exports of consumer goods.
S&P CoreLogic Case-Shiller HPI
Across the 20-city survey, home prices were nearly flat, up only 0.1% on a seasonally adjusted basis in the month of June. Prices are up 0.7% overall and 5.7% annually. In Florida, Miami and Tampa showed strong growth; Seattle was the strongest, up 13.4%. Prices in Portland are up 8.2%. Prices in Cleveland and Chicago have been coming down; New York and Atlanta show slower growth. Washington, D.C., has only seen prices rise 3.1% and Cleveland homes are 2.9% higher than they were at this time last year.
Consumer Confidence
Consumer confidence went up 2.9 points to 122.9. Domestic and international tensions don’t seem to be having an effect on consumer optimism. Present situation components were up 5.8 points to 151.2. The present situation component was up 1 point to 104.
Digging further into the numbers, the number of Americans who said jobs were hard to get fell 1.4% to 17.3%. There was also a 2.2% increase in the number of people who said jobs were plentiful to 35.4%. Expectations of rising incomes were also up 0.9% to 20.9%. Fewer Americans were pessimistic about income, falling 1.7%. On the downside, inflation metrics fell 0.1% to 4.5%. Buying plans were down in the report.
MBA Mortgage Applications
Mortgage applications were down 2.3% last week. Purchase applications fell 3% and refinance applications were down 2%. The average rate was down one basis point to 4.11% last week on a 30-year-fixed conforming mortgage.
Gross Domestic Product (GDP)
GDP numbers were up 3% on a seasonally adjusted basis for the second quarter. Prices are up 1% overall. Consumers spent 3.3% more dollars in the second quarter. Non-residential investment was up 6.9% in this revision of the numbers. Unfortunately, residential investment was down 6.5%. Personal consumption expenditures were up 0.9% and the savings rate was down 0.2% to 3.7%. Government spending fell.
Jobless Claims
Initial jobless claims were up 1,000 last week to 236,000. The four-week moving average fell 1,250 to 236,750. On the continuing claims side, they were down 12,000 for the week to 1.942 million. Continuing claims fell 6,250 to come in at 1.952 million.
Personal Income and Outlays
Personal income rose 0.4%. Meanwhile, consumer spending rose 0.3%. There’s a 0.1% increase in overall prices. Core prices were up 0.1%. Both inflation metrics are up 1.4% on the year. Services spending was weaker, up only 0.2%. Durable and nondurable goods were up 0.6% and 0.5%, respectively.
Pending Home Sales Index
Pending home sales were down 0.8% to 109.1. This is an indication that the number of purchase agreements in place for existing home sales was down for the month of July. Housing in the South fell 1.7%. The only region with a gain was the West at 0.6%.
Employment Situation
Nonfarm payrolls came in 24,000 below expectations at 156,000 in August. Unemployment also ticked up 0.1% to 4.4%. However, 165,000 jobs were added to private payrolls, and government payrolls fell by 9,000 jobs. There were 36,000 jobs added to manufacturing payrolls. Average hourly rates were up 0.1% on the month and 2.5% on the year. The average workweek was 34 hours, 24 minutes. Construction payrolls were up 28,000 jobs in August. Retail jobs were up only 1,000.
ISM Manufacturing Index
This manufacturing composite confidence metric exceeded expectations, rising 2.5 points to come in at 58.8. Production is high, at 61. It’s worth noting that this contrasts a bit with the industrial production report. There’s also some disagreement between this and the jobs report in terms of manufacturing hours with this report showing higher estimates. New orders are at 60.3. Employment is at 59.9. Backlog orders are strong, which is a good sign for future hiring. Export orders are also up.
Consumer Sentiment
Consumer sentiment fell 0.8 points in the final reading of August to come in at 96.8. This is still higher than final readings for July and June. Final expectations came in at 87.7, 7.2 points higher than July. The weakness was in current conditions, which dropped to 110.9 from 113.4. Inflation expectations over the next year were flat at 2.6%. Over the next five years, they were down 0.1% to 2.5%.
Mortgage Rates
Mortgage rates continued to drop last week. With the amount of uncertainty in the market right now, if you see a rate you like, it’s a good time to get it locked .
Last week, 30-year fixed-rate mortgages (FRMs) averaged 3.82% with 0.5 points added. This is down from 3.86% last week. Last year at this time, rates were at 3.46%.

On the shorter-term side, 15-year FRMs averaged 3.12% last week, down from 3.16% with 0.5 points. At this time last year, the 15-year rate was 2.77%.
Finally, 5-year treasury-indexed adjustable rate mortgages (ARMs) averaged 3.14% this week with 0.5 points. This was down from 3.17% last week. A year ago, the average rate was 2.83%.
Stock Market
Stocks rose Friday despite a weaker-than-expected jobs report. Lower inflation than what the Federal Reserve wants could mean a slower move on monetary policy, which could be helping the markets.
The Dow Jones industrial average came in 39.46 points higher. It closed at 21,987.56, up 0.8% for the week. The S&P 500 gained 1.37% week over week to close at 2,476.55 after being up 4.9 points Friday. Finally, the Nasdaq closed at 6,435.33, up 6.67 points on the day and 2.71% on the week.
The Week Ahead
Wednesday, September 6
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.
International Trade (8:30 a.m. ET) – International trade is composed of merchandise (tangible goods) and services. It’s available by export, import and trade balance for six principal end-use commodity categories and for more than 100 principal Standard International Trade Classification system commodity groupings.
Thursday, September 7
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 four-week moving average of new claims smooths out weekly volatility.
There’s not a ton hitting this week, which means we get a little bit of a respite from economic news. We’ll cover everything worth reporting. If this mortgage and economic news makes you want to take an early afternoon snooze, we also have plenty of home, money and life content we’ll share with you if you subscribe to the Zing Blog below.
It’s after Labor Day, and that pretty much means any child that can be back to school is by now. We have a school supply list that will make your child the envy of the class. Have a great week!
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