U.S. employer’s add 280,000 jobs in May – The Labor Department reported that 280,000 net new jobs were created in May. This number shocked the markets, as experts were expecting around 200,000 new jobs. The unemployment rate rose from 5.4% in April to 5.5% in May as more workers entered the labor force. This is both due to new college graduates, and heightened confidence in the job market. The unemployment rate was 6.3% in May 2014. Wages showed growth increasing 2.3% from last May. All sectors showed strong growth except oil and mining which lost another 18,000 jobs. Low oil prices have caused the loss of 63,000 of these energy related jobs so far this year. The strength of this report caused experts to worry that it will put pressure on The Federal Reserve to raise interest rates.
Bond yields soar this week – Europe announced that their inflation rate was rising. Germany increased its key interest rate. Friday’s jobs report caused investors to expect the Fed to raise interest rates, as it showed the economy is still strengthening. The 10 year U.S. Treasury Bond closed the week at a 2.41% yield, up sharply from 2.12% last week. The 30 year U.S. Treasury Bond closed Friday yielding 3.11%, also up from 2.88% last Friday.
Mortgage Rates increase at least 1/4% this week – The 30 year fixed rate ended the week around 4.25% for loans up to $417,000, and around 4.25% for loans between $417,000 and $625,500 and 4.625% for loans over over $625,500. The 15 year fixed rate loans are about 3.50% for loans up to $417,000, and around 3.50% for loans between $417,000 and $625,500, and around 3.625% for loans over $625,500. The 5 Year-ARM rates are around 3.20%. 1 Year-ARM mortgages are around 2.70%.
Consumer debt surges in April – The Federal Reserve reported that consumer borrowing expanded by $20.5 billion in April, up 6.6% from last April. Strong gains over the last few months pushed consumer debt to a new record, $3.38 trillion. Credit card debt rose $8.6 billion, the largest gain in 12 months. Economists expect that consumers, who have seen strong job gains, will keep borrowing and spending in the coming months, which will help boost economic growth.
Fed says economy growing at a moderate rate – The Federal Reserve released its Beige Book Survey which includes business conditions throughout the country. They said the economy is growing at a moderate pace. They reported that : Consumers have ramped up spending at retailers and auto dealers. Manufacturing activity has held steady or increased in all regions with the exception of the energy industry. Tourism has picked up in much of the country.
Strong economic news causes stocks drop on fears of higher interest rates – Fears of rising interest rates rattled the markets this week. Early in the week it was reported that inflation had picked up in Europe. Germany raised its benchmark rate. U.S. Exports were stronger than expected in April. An upbeat outlook was released by The Fed which showed the economy gaining steam, after a disappointing winter. All this “good news” led to higher bond yields, as experts expect a rate rise by The Fed coming. Friday’s jobs report caused bond yields and mortgage rates to rise further. Higher rates cut into corporate profits, as corporate debt becomes more expensive. The Dow Jones Industrial Average closed the week at 17,849.46, down from 18,010.68 last week. The Nasdaq closed at 5,068.46, down slightly from 5,070.03 last Friday. The S&P 500 closed at 2,092.83, also down from last Friday’s close of 2,107.03.