Weekly Economic Summary

Last week in review (May 30 – June 3, 2011)

The big news of last week was the official Jobs Report, which came in well below expectations. In fact, in the private sector alone, the report indicated that only 83,000 jobs were created in May, and that number was almost 100,000 less than expected.



Although the hourly earnings component of the report came in a little better than expected, the overall report was discouraging. Now the markets will have to wait and see if this report was just a bump in the road to recovery or if the economy has slowed down once again.



Manufacturing slowing?



New data on the manufacturing sector of the economy also indicated a possible slowdown, as the Chicago PMI and the ISM Index, which both measure manufacturing, came in below expectations.



Rumors of a bailout lower the U.S. Dollar



Reports came out last week that Germany is putting together a plan to bail out Greece. The plan would allow Greece more time to determine a strategy to put their debt in order for the long term. As a result of the bailout discussion, the Euro was strengthened and the U.S. Dollar dipped lower. Remember, a softer U.S. Dollar helps U.S. stocks, as U.S. companies benefit from stronger exports with a weakening dollar. But a lower dollar isn’t good for bonds, so this news stalled the rise of bonds early last week.



Home prices still very affordable



We also received new data last week on home prices across the country. According to the 20-city Case-Shiller Home Price Index, prices were down 0.8% in March. Overall, bank-owned sales continue to weigh on housing, and are expected to do so for a couple more quarters.



As you can see in the chart below, mortgage bonds and home loan rates have benefited from weak economic data the last couple of weeks.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday, June 3, 2011)