Tariff Volatility Offsets Job Gains
News about tariffs continued to cause volatility in mortgage markets last week, with little net effect. The latest labor market data was a bit stronger than expected overall due to strong wage gains, and mortgage rates ended last week slightly higher.
Jobs Beat Forecast, Wages Jump
The key Employment report revealed that the economy added 139,000 jobs in May, above the consensus of 130,000, but downward revisions to the results for prior months more than offset the excess gains. The unemployment rate remained at 4.2%, as expected. Average hourly earnings were 3.9% higher than a year ago, up from an annual rate of 3.8% last month and well above the consensus forecast.
ISM Reports Show Sector Contraction
Two other significant economic reports released last week by the Institute of Supply Management were a bit disappointing. The ISM national services sector index dropped to 49.9, well below the consensus forecast and the lowest level since June 2024. The national manufacturing index declined to 48.5, also below expectations. Readings above 50 indicate an expansion in the sectors and below 50 a contraction.
Trade Deficit
The U.S. trade deficit surged to a record high of around $140 billion in March, as companies and consumers rushed to purchase ahead of potentially higher prices. With the easing of trade tensions, however, more typical levels returned in April. The deficit dropped by more than half to just $62 billion, which was below the consensus forecast. Imports fell by a massive 16% from March, while exports increased a little.
ECB Cuts Rates to 2.0%
On Thursday, the European Central Bank (ECB) reduced benchmark interest rates by 25 basis points to 2.0%, down from a high of 4.0% in the middle of 2023. This move was widely anticipated, and the reaction was relatively minor. In its meeting statement, the ECB said that the decision was based on its “updated assessment for the inflation outlook” and that rising trade issues pose a risk to economic growth.
Mortgage Rates for the week of 6-9-2025