Mortgage Rates Climb
A wide range of major economic data released last week was stronger than expected, which increased future inflationary pressures. As a result, mortgage rates climbed to their highest levels since April.
Labor Market
The key Employment report revealed that the labor market surged for the second straight month, as the economy added 256,000 jobs in December, far above the consensus forecast of 160,000. Sectors displaying particular strength included retail, health care, and leisure/ hospitality. In addition, the unemployment rate unexpectedly declined from 4.2% to 4.1%. Average hourly earnings, an indicator of wage growth, were 3.9% higher than a year ago.
Services Sector Index Rose
Two other significant economic reports released last week by the Institute of Supply Management again revealed diverging fortunes for two important segments of the economy. The ISM national services sector index rose to 54.1, above the consensus forecast. The national manufacturing index increased to 49.3, also above expectations, but this was still its ninth straight month under 50. Since readings above 50 indicate an expansion in the sector and below 50 a contraction, these reports continue to reinforce the fact that service companies have been outperforming manufacturers in recent months.
Officials Move to a More Hawkish Outlook
The minutes from the December 18 Fed meeting released last Wednesday provided a closer look at the reasons that officials shifted to a more hawkish (tighter) outlook for future monetary policy. As a reminder, the latest forecasts from officials following the meeting anticipated just two additional 25 basis point federal funds reductions this year, down from four rate cuts in the prior set of projections three months earlier. According to the minutes, unexpectedly stubborn recent inflation data and uncertainty about changes to trade and immigration policies were two primary considerations behind the revised outlook.
Mortgage Rates for the week of 1-13-2025