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Weekly Economic Update

February 2, 2018


The Economy

  • The U.S. economy added 200,000 jobs in January—beating economists’ expectations and outpacing the previous month’s gain. The unemployment rate held at 4.1%, the lowest level since December 2000. Hourly wage growth improved by 2.9% year over year, the strongest annual gain in nine years.

  • The Federal Reserve (Fed) left interest rates unchanged in a unanimous vote, despite moderate economic expansion and a solid labor market. The central bank’s official statement pointed to accelerating inflationary pressures and reinforced the likelihood of multiple rate hikes in 2018.

  • Personal income expanded by 0.4% in December, with wages and salaries rising by 0.5%. Consumer spending also advanced by 0.4%, partly due to the savings rate slipping to a 13-year low. Core personal consumption expenditures (which excludes food and energy and is the Fed’s preferred measure of inflation) inched 0.2% higher for the period; the year-over-year reading was unchanged at 1.5%.

  • The S&P CoreLogic Case-Shiller Home Price Index edged up by 0.7% in November and by 6.4% year over year, driven by strong demand and a tight labor market.

  • Initial jobless claims moderated by 1,000 to 230,000 in the week ending January 27, as companies continued to retain high numbers of employees in a tight labor market. The more-stable four-week moving average dipped by 5,000 to 234,500. The four-week moving average of continuing claims increased by 12,000 to 1.93 million in the week ending January 20, but remained near its 44-year low.

  • The Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) decelerated in January, but remained in solid expansion territory due to 10-year highs in new orders and production. A similar report from Markit also showed strength in exports and new orders.

  • Consumer confidence rebounded in January on strong employment and stock-market expectations, according to the Conference Board, nearing a 17-year high set in November.

  • Mortgage-purchase applications were 3% lower in the week ending January 26, due to a recent trend of slowly rising rates. Refinancing activity (which is sensitive to even small rate changes) dropped by 3% in the same period.

  • The eurozone’s economy expanded by 0.6% in the fourth quarter, according to a preliminary reading, pointing to continued wide-ranging recovery in the region.

  • Activity in China’s manufacturing sector remained in expansion territory during January, according to a PMI reading; strong output offset moderation in new order growth.

  • Japan’s PMI composite showed accelerated expansion in January, as new orders and new export orders recorded multi-year highs.

    U.S. Economic Calendar

  •  February 5: PMI Services Index, ISM Non-Mfg Index

  •  February 6: International Trade, Job Openings and Labor Turnover Survey

  •   February 7: Mortgage Applications, Consumer Credit

  •  February 8: Jobless Claims


  • Treasury yields rose and the 10-year yield hit a four-year high, as investors turned their attention to a falling U.S. dollar and the possibility of rising inflation.
  • Global bond markets moved lower this week. Global corporate bonds outperformed, followed by government bonds; high-yield bonds lagged. 



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