“All shook up.” (Elvis Presley) The jobs report, inflation news and the Fed meeting were a recipe for volatility in the markets this past week.
Employers added 200,000 new jobs in January while the November and December figures were revised lower by a total of 24,000 jobs, the Bureau of Labor Statistics reported. The unemployment rate remained at 4.1 percent. The big news within the report was a rise in annual wage growth, which surged 2.9 percent from January 2017 to January 2018. This was the biggest increase since June 2009. Wages had been stagnant, and the unexpected rise is a key metric for the economy. Overall, this was a solid report.
Inflation remained somewhat tame in December, while personal income and spending matched expectations. The Fed’s favorite inflation gauge, Core Personal Consumption Expenditures, was unchanged at 1.5 percent year-over-year. The month-over-month reading saw a 0.2 percent rise, which was expected. The core reading excludes volatile food and energy prices.
The Fed met and, as expected, made no changes to its benchmark Fed funds rate. This is the rate banks use to lend to each other overnight, and it does not directly impact home loan rates. The Fed did note that while inflation continued to run below the 2 percent threshold it aims for, it believes inflation should evolve to rise in the next 12 months.
Inflation is always a key factor to monitor as it reduces the value of fixed investments like mortgage bonds and impacts the home loan rates tied to them.
Though mortgage bonds have worsened and home loan rates have risen recently, rates remain historically attractive.
After last week’s full economic calendar, just two reports are ahead this week.
- The ISM Services Index will be released on Monday.
- As usual, look for weekly Initial Jobless Claims on Thursday.
If you or someone you know has questions about home loans or home loan rates, please contact me. I’m always happy to help.