8.3.2024 Weekend market update
TLDR: Weaker jobs report led to lower mortgage rates!
**Weekly Economic Update**
Mortgage rates have dropped a bit every day this week, and it is such a breath of fresh air! It is such a difference from the end of last year. The road hasn’t been easy, with plenty of twists and turns, but the last three months have shown a solid trend towards lower rates.
This is only the third time we’ve seen long-term rates, like the 10-year Treasury yield, make a serious attempt to drop more than half a percent since 2022. The first two times, they didn’t quite make it, leading to even higher rates. This time, we got lucky—if rates had gone up just a bit more a few months ago, we might have been stuck in that cycle again. But instead, we’re seeing rates fall.
From May through July, there was cautious optimism, thanks to improvements in inflation data. The Fed felt more confident about cutting rates, but they were still cautious because the labor market was holding strong. Then, this week’s jobs report changed everything.
The latest jobs numbers were a shocker: only 114,000 new jobs in July, far below the expected 175,000. The unemployment rate ticked up to 4.3% from 4.1%, and wage growth slowed down to 0.2%, hitting pre-pandemic levels. These figures put a damper on the economy, which, in turn, is good news for mortgage rates.
Earlier in the week, the market was already responding positively to some other disappointing economic data, but the jobs report took things to the next level. Traders were expecting the Fed to cut rates by half a percent by the end of 2024, but now they’re looking at a full point cut. This led to one of the biggest single-day drops in average mortgage rates that we’ve seen in the past two decades.
While nobody can predict the future, the next few weeks will be critical. If we see more weak economic data, rates could drop even further. Keep an eye on the ISM Services Index on Monday and the Consumer Price Index (CPI) next week—these reports will be key. Beyond that, the next month and a half could be volatile, especially with the market now second-guessing the Fed’s decision to hold rates steady this week.
This could be the perfect time to help your clients take advantage of these lower rates!