Weaker than expected economic data released this week reduced the outlook for future inflation. This caused mortgage rates to improve, and they ended the week at their best levels since April.
Friday's key Employment report was disappointing nearly across the board. Against a consensus forecast of 205K, the economy added just 142K jobs in September. In addition, there were large downward revisions to the results from prior months. The economy has added an average of 167k jobs over the last three months. This level is consistent with an improving labor market, but it is well below the average monthly job gains of 260k seen in 2014.
Wages alos missed the mark with a slight decline from August. They were just 2.2% higher than a year ago. The Unemployment Rate was unchanged at 5.1%.
The employment report and the other recent economic data suggest that the U.S is feeling the effect of a stronger dollar economic troubles overseas. Exports are on track to post their first annual decline since the financial crisis. The ISM national manufacturing index released on Thrusday droped to the lowest level since May 2013. Weakness in the recent data caused expectations for a Fed rate hike in 2015 to decline substantially.
Looking ahead, the ISM national services index will be released on Monday. The Fed Minutes from the September 17 meeting will come out on Thrusday. These detailed minutes provide additional insight into the debate between Fed officials and have the potential to significally move markets. There will be treasury auctions on Tuesday, Wednesday and Thursday. In addition, investors will be watching for any escalation of Russian involvement in the Middles East.