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By G. Steven Bray
This is jobs report week, and rate markets are once again seeking direction.
It’s likely this week’s report will show the economy continues to create jobs at a moderate pace. The question has been and still is what is the quality of those jobs? Far too many have been low-paying, service sector jobs. As a result, wage growth has been almost non-existent. Rising wages would signal that the economy is heating up and lead to higher interest rates. A couple months ago, it appeared that might happen, but last month’s report returned wages to their previous, anemic trend.
Other than the jobs data, most recent economic reports have shown a slowing economy. A weaker jobs report could tip market sentiment again in favor of lower rates. Another good report for jobs but lacking in wage growth is likely to make markets yawn.
While most of our attention is on the pending jobs report, we shouldn’t forget about events overseas. Greece still hasn’t resolved its debt issues, China’s economy is slowing further, and fighting continues with renewed vigor in the Middle East. This uncertainty also favors lower rates.