Market Update - September 4th, 2023
Happy Labor Day! Hope everyone enjoys a well-deserved day of relaxation and appreciation for all your hard work. There is no rest for weary for Nick and I as we are back to break down the latest and greatest in the mortgage world!
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Rates Finally Retreat From Record Highs
The month of August was brutal for the mortgage world as we saw mortgage rates increase to 20+ year highs. However, September already appears to be a breath of fresh air as we have seen rates drop to the lowest levels we have seen in nearly 3 weeks. Why did we see an improvement in mortgage rates? Bad economic news. Remember, when it comes to mortgage rates, bad news is good news. The leading indicators that lead to the nice decline in rates was the worse-than-expected labor market.
Decline in New Job Openings
One of the main reasons we saw a decline in rates last week was due to the JOLTS report that was released on Tuesday. The JOLTS report tells us how many job openings there are each month. The report showed a significant decrease in the number of job openings, reaching its lowest point since March 2021. This was important because it aligns with the Fed’s desire to witness a slowdown in the hot labor market. A slowdown in the labor market will hopefully lead to the Fed halting interest rate hikes.
Another important aspect of the report was the number of people quitting their job. The reduced number of people quitting their job indicates that job opportunities are less abundant, which reduces the tendency for individuals to switch jobs for better pay. This leads to less pressure for businesses to increase wages to attract or retain employees. The reduced pressure of employers needing to increase wages puts less upward pressure on inflation, which is a positive sign that aligns with the Fed’s criteria for justifying a pause in interest rate hikes.
Key Takeaway: Mortgage rates improve when economic data comes in weaker. The number of job openings was the weakest since March 2021. This is good news as the Fed wants to see more evidence that the higher rates are having a negative impact on the hot economy, which will hopefully lead to lower inflation. More economic pain = Lower mortgage rates.
Unemployment Increases to 3.8%
It seems weird to root for economic pain, but it’s the unfortunate reality we find ourselves in at the moment. Fridays Labor report showed that the unemployment rate rose to 3.8% when it was expected to remain at 3.5%. This is the highest level of unemployment we have faced since February 2022. However, it is still below the Fed’s estimate of 4.1% unemployment by the end of this year. Again, the rise in unemployment is another indicator that the Fed is looking for to justify halting their interest rate hikes. Financial markets are now betting the Fed is done raising rates and may start cutting them next year 😊
Key Takeaway: The rise in unemployment likely means the Fed will not increase rates again during their next meeting on September 20th (Thank you, Jesus!). If we continue to receive positive news on inflation decreasing in September and October, we may likely see the end to the Fed’s interest rate hikes 😊
Instagram Posts from Last Week
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