Overview: Over the past week, the big surprise on the economic front was that the latest Employment Report far surpassed expectations for the second straight month. Despite the strong labor market data, however, it was another quiet week for mortgage markets, and rates fell slightly to record-low levels.

In June, the economy added a massive 4.8 million jobs, which was well above the consensus forecast for an increase of 3 million — and a record high. For perspective, typical monthly readings in 2019 were for job gains of around 200,000. The unemployment rate dropped sharply from 13.3% to 11.1%, which also was much better than the consensus forecast.

The strength in the labor market was widespread. The leisure and hospitality sector gained 2.1 million jobs in June, and retail added another 740,000. In general, the industries hurt most by the pandemic’s economic effects showed the largest rebounds.

Another significant economic report released this week also contained clear signs of a strong recovery. The Institute for Supply Management (ISM) Services Index jumped from 45.4 to 57.1, which was far above the consensus forecast. Readings above 50 indicate an expansion in the sector. Investors closely watch this report because the services sector represents more than two-thirds of U.S. economic activity.

Week Ahead

Looking ahead, investors will continue watching for news about plans to reopen the economy, medical advances to fight the pandemic, Federal Reserve monetary actions, and government stimulus programs. Beyond that, the Consumer Price Index (CPI) will come out on July 14. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. The Retail Sales report will be released on July 16. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of the strength of the economy.

Monthly Job Gains (millions)