Mortgage rates fell this week and are now far from the levels that were widely discussed after the election. With the final jobs report for 2024, mortgage rates made a nice move down today, and it was a positive story this week. We discussed this possibility in last week’s Housing Market Tracker: Will there be a Santa Claus meeting on mortgage rates? Economic data has played a major role in the market, unlike speculative ideas.
So, what did this work week reveal? It’s consistent with the trend we’ve been observing: the labor market is softening but not collapsing. Additionally, the most important factor affecting the 10-year bond this week was the ISM service sector report which was the weakest of any labor data released. Mortgage spreads improved significantly on Friday, too, which helped prices, so start spreading the news.
Let’s look at labor statistics to understand where we stand in the economic cycle.
Activities on Friday
From BLS: Total farm payrolls rose by 227,000 in November, while the unemployment rate was little changed at 4.2 percent, the US Bureau of Labor Statistics reported today. Employment tends to be in health care, recreation and hospitality, government, and social assistance. Retail trade lost jobs.
This report may be noisy due to the recent hurricanes and strike-related news. However, this has been an ongoing trend for the past 14 months. The labor market is softening, but not collapsing. Meanwhile, wage growth remains higher than expected The Federal Reserve desires. The Fed would like to see wage growth around 3%, but currently, it stands at 4%.
From the BLS: In November, average hourly earnings for all self-employed workers rose 13 cents, or 0.4%, to $35.61. Over the past 12 months, average hourly earnings have increased by 4.0 percent.
With a labor market of more than 157 million people employed in December 2023 in nonfarm payrolls, I expected the monthly job opening numbers to be more in line with my expected range of 140,000 to 165,000 jobs per month. This seemed reasonable to me as we were looking at 159 million working people. However, this only happened after receiving recent negative updates to the data. Let’s look at the updated statistics.
- 3-month average: 172,666
- 6-month average: 143,000
- 12-month average: 189,500
- The average of the three is 168,000.
It’s much higher than I expected this time, and this is for all the negative reviews, too. Add 4% wage growth to this story, and the labor market is not collapsing but rather softening to the levels we saw in 2023. If you look at the unemployment rate, you can see the labor market has softened from a low of 3.4%. in 2023 up to 4.2% of today.
Overall, the labor data for 2024 looks good to me, except that wage growth remains stronger than I thought it would be at this point, as I was looking more in the 3.4%-3.6% camp.
Job openings and frivolous claims
Job opening data rose slightly in this week’s report but remained well below the peak seen during the COVID-19 recovery. I was among the first to predict that job openings would approach 10 million this cycle, and that estimate turned out to be extraordinary, as job openings peaked at around 12 million.
Internal job opening data shows a sluggish labor market, as the percentage of layoffs and the number of hires fell. Hiring is down, but layoffs aren’t happening on a large scale; The latest jobless claims data show that national layoffs remain low.
The headline number for printing frivolous claims has increased, but is still at a historic low of 224,000. Remember my line in the sand for the recession: Jobless claims for the four-week moving average must exceed 323,000. It’s nowhere near that, as the four-week moving average is 218,500.
After the jobs report, the 10-year yield fell a few points; Mortgage rates did much better today, as mortgage spreads improved from two days ago, which helped lower mortgage rates. As I have mentioned many times in our weekly tracker article, if mortgage spreads were closer to normal, mortgage rates would be closer to 6%, and in today’s case, they would be less than 6%. We have all seen for two years now that the housing market is doing better as house prices have fallen close to 6%.
The HousingWire Economic Summit is coming up in February in Dallas. It will bring together an impressive line-up of talented speakers for an inspiring day. You can register for this revolutionary event using the link below. Along with Mike Simonsen and myself, here are a few notable speakers who will be sharing their insights:
- Jessica LautzDeputy Chief Economist and Vice President of Research at NAR
- Barry Habibthe CEO of MBS Highway
- Selma HeppCoreLogic’s Chief Economist
The link to register with my discount code is here.
Related
Source link
