The major economic data released this week revealed mixed results. This caused some volatility during the week, but mortgage rates ended with little change.
In November, the economy added 199,000 jobs, above the consensus forecast of 180,000, but the results for prior months were revised lower by 35,000. The largest gains were seen in health care, government, and leisure/hospitality, while the retail sector unexpectedly posted a significant decline.
The other major components of the Employment report exceeded expectations. The unemployment rate declined from 3.9% to 3.7%, below the consensus for a flat reading. Average hourly earnings increased 0.4% from October, slightly above the consensus forecast. Earnings were 4.0% higher than a year ago, the same annual rate of increase as last month and the lowest level since June 2021. Fed officials keep a close eye on wage growth because it generally raises future inflationary pressures.
While the Employment report was a bit stronger than expected overall, the JOLTS (job openings and labor turnover rates) data suggested looser conditions in the labor market. At the end of October, there were 8.7 million job openings, far below the consensus forecast of 9.3 million and the lowest level since March 2021. This equates to just 1.3 openings for each available worker, down from around 2.0 only a few months ago, nearly in line with the levels seen prior to the pandemic. In addition, the “quits” rate was just 2.3%, down from about 3.0% at the end of 2021. Since people generally are more willing to voluntarily leave their jobs when they are optimistic about finding a better one, a lower quits rate is consistent with a looser labor market. Similarly, a lower number of openings suggests that companies face less pressure to raise wages in order to hire enough workers, so this positive news on inflation also was favorable for mortgage rates.
Lower rates have jumpstarted applications for home refinancing, according to the latest data from the Mortgage Bankers Association (MBA). Applications to refinance increased 14% from last week and were 10% higher than one year ago, making the last couple of weeks the best period since 2021. Purchase applications were flat from the prior week and remain down 17% from last year at this time.
The next Fed meeting will take place on Wednesday. No change in rates is expected, and investors will focus on the latest set of forecasts from officials. This will be followed by the European Central Bank meeting on Thursday. For economic reports, the Consumer Price Index (CPI) will be released on Tuesday. CPI is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. Retail Sales will come out on Thursday. Since consumer spending accounts for over two-thirds of U.S. economic activity, the retail sales data is a key measure of the health of the economy.
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