The major economic news this week was not favorable for mortgage markets. The key Employment report released on Friday exceeded expectations by a wide margin, and comments from the Fed suggested that rate cuts will take place at a slower pace than investors anticipate. As a result, mortgage rates ended the week higher.
The economy added 254,000 jobs in September, well above the consensus forecast of 140,000, and the results for prior months were revised higher. The largest gains were seen in the hospitality, healthcare, and social assistance sectors. The unemployment rate unexpectedly fell from 4.2% to 4.1%, the lowest level since May. Finally, average hourly earnings were 4.0% higher than a year ago, far above the consensus forecast, and the highest level since March.
Two other significant economic reports released this week by the Institute of Supply Management revealed mixed results. The ISM national services sector index jumped to 54.9, far above the consensus forecast and the highest level since February 2023. By contrast, the national manufacturing index was just 47.2, a little below expectations. Since readings above 50 indicate an expansion in the sector and below 50 a contraction, these reports continue to highlight that service companies have outperformed manufacturers over the last couple of years.
In a speech on Monday, Fed Chair Powell indicated that the pace of lowering the federal funds rate may be slower than anticipated by investors. If the economy performs as forecasted, Powell expects that there will be another 50 basis points in rate cuts this year, while investors had priced in 75 basis points in reductions before the end of the year. He added that officials are not “in a hurry” to cut rates quickly and that future decisions will be based on incoming economic data. The news that monetary policy easing may be more gradual was negative for mortgage rates, and Friday’s strong labor market data reinforced the case for smaller rate cuts.
Investors will continue to look for Fed officials to elaborate on their plans for future monetary policy and will closely monitor the situation in the Middle East. For economic reports, the main event will be CPI on Thursday. The Consumer Price Index (CPI) is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. The Producer Price Index (PPI), another inflation indicator, will come out on Friday.
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
Compliments of: Brian Grubbs President
& CEO | NMLS ID: 69586 Raleigh Mortgage Group, Inc. NMLS
69573 Main: 919.866.0212 bgrubbs@raleighmortgagegroup.com www.raleighmortgagegroup.com
Call me for Quick & Easy purchase or re-finance!