Market Update: Rates Fall After Employment Situation News; Potential to Improve Further This Week with the Consumer Price Index

Blog posted On January 09, 2023

Mortgage rates saw a sharp downward trend on Friday following some unexpectedly low numbers on December’s employment situation reports. The Federal Reserve has been closely watching employment data over the past several months to see if the numbers will aid in the fight against inflation. In general, lower employment numbers are better for inflation, the bond market, and interest rates.

While Friday’s numbers showed strong job growth, they also reflected slower-than-expected wage growth. Nonfarm payrolls and private payrolls were expected to increase by 200,000 and 180,000 respectively. They surpassed these expectations by 23,000 and 40,000 respectively. Annual wage growth, however, fell 0.4% below expectations. “The wage component is/was important news because Fed Chair Powell specifically referenced wage growth concerns in the last press conference in mid-December,” notes Matthew Graham of Mortgage News Daily. “If wages aren't accelerating, it's one less inflationary concern for the Fed.”

Inflation is the enemy of both bonds and the Fed (currently) – both of which influence mortgage rates. Therefore, the encouraging inflation signs from the jobs reports caused the bond market to jump for joy and mortgage rates to consequently fall.

But the fun doesn’t stop there. December’s consumer price index is scheduled for release this week. Right now, the consumer price index is the most commonly used and highly anticipated inflation-measuring method. If the numbers come in higher than expected, it could mean bad news for bonds and rates. Conversely, if the numbers come in lower than expected or as expected, it could mean good news.

If you haven’t already, it might be a good time to explore our rate lock options, which can prevent your rate from climbing higher but allow you to float down once. If you have any questions, let us know!

Sources: Bloomberg,  MBS Highway, Mortgage News Daily, Mortgage News Daily