Turbulent Week for Mortgage Markets
During a week packed with major economic reports, mortgage markets exhibited the anticipated volatility. What was somewhat surprising, though, was that the price movements were almost completely offsetting, and mortgage rates ended last week just slightly higher.
Job Gains Tumble
With major distortions from two hurricanes and a large Boeing strike, forecasts varied widely for the key Employment report, but the latest figures still fell far short of expectations. The economy added just 12,000 jobs in October, well below the consensus forecast of 100,000 and the smallest monthly increase since December 2020. In addition, the results for prior months were revised lower by 112,000. The unemployment rate remained flat at 4.1%, as expected. Average hourly earnings, an indicator of wage growth, were 4.0% higher than a year ago, also matching expectations.
ISM Manufacturing Index Weakens
Another significant economic report released last week from the Institute of Supply Management also indicated unexpected weakness. The ISM national manufacturing index dropped to 46.5, below the consensus forecast of 47.5 and the lowest level since June 2023. Since readings above 50 indicate an expansion in the sector and below 50 a contraction, the report suggests that this important segment of the economy is slowing.
Progress Toward 2% Target Slows
Fed officials keep a close eye on inflation, and the PCE price index is their favored indicator. In September, core PCE, which excludes food and energy to reduce short-term volatility, rose 0.3% from August, matching expectations. Notably, services prices increased 0.3% from August, while goods prices declined 0.1%. Core PCE was 2.7% higher than a year ago, the same annual rate of increase as last month. While far below its recent peak, further progress toward the 2.0% target of the Fed remains challenging, and this desired level has not been achieved since February 2021.
GDP Growth Moderates
Gross Domestic Product (GDP) is the broadest measure of economic activity. During the third quarter of 2024, U.S. GDP rose at an annualized rate of 2.8%, modestly below the consensus forecast of 3.0% and down from 3.0% during the second quarter. Consumer spending and government spending were two of the biggest contributors to the growth during the quarter.
Mortgage Rates for the week of 11-04-2024