Last week the major economic data and comments from an important Fed official were viewed as negative for mortgage rates. This was partially offset by Friday’s report of possible plans for a long-range missile test by North Korea. As a result, mortgage rates ended the week slightly higher.
Much of the data in Friday’s key Employment report was affected by the recent hurricanes. While the consensus forecast called for gains of 100,000, the economy lost 33,000 jobs in September. Job losses were seen mainly in the areas most affected by the hurricanes such as the restaurant industry. By contrast, wage growth rose far more than expected, which was the highest reading since December 2016. The wage figures likely received a boost from the hurricanes, since many of the lost jobs were lower paying ones.
According to the Labor Department, the survey data used to calculate the unemployment rate was not affected by the hurricanes. The unemployment rate in September unexpectedly declined to 4.2% from 4.4% in August (the lowest level since February 2001). Investors reacted to the unemployment rate and wage data by pushing mortgage rates higher.
On Thursday, comments from Federal Reserve Bank of San Francisco President John Williams were more “hawkish” than expected. Williams thinks that the decline in inflation in recent months has been mostly due to factors which have just a “temporary effect.” He believes that it will be appropriate to continue to raise the federal funds rate even if inflation remains low. His surprisingly strong support for tighter monetary policy caused mortgage rates to move a little higher.
This week, Friday will be the big day for economic data with Retail Sales figures. Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. Mortgage markets will be closed today in observance of Columbus Day.
Please reach out with any questions in regards to this, or if there is anything we can do for you and your valued clients.
Thank you for your continued support, have a productive week.
SVP, Regional Manager
THE CRAWFORD TEAM
V.I.P. Mortgage, Inc.