Weak labor market data fuels the latest rate drop

Mortgage rates drop to their lowest point since October of 2024

Happy Friday from Local Mortgage!

As we said last week, rates could be on the move this week and they did not disappoint. We moved down to the lowest levels since October of last year. We will end the week with 5.875% costing just one-eighth of a percent in discount points on our best 30-year fixed conventional scenario.

Weaker than expected labor market data was the catalyst for this week’s rate move. Wednesday’s JOLTS report showed that job openings fell to 7.2 million which was the lowest level since December 2020. And Friday’s big employment report was a miss as the economy added only 22,000 jobs, well below the already weak projection of 75,000. The unemployment rate moved up from 4.2 to 4.3%, which is the highest level since 2021.

The other two major reports released by the Institute of Supply Management beat expectations as the both the manufacturing and services sector index were better than expected. But neither report was able to offset the significance of the weak labor market reports. Investors know that weak employment data will help cool inflation and promote future rate cuts, even beyond what is expected at the September FED meeting.

Next week, inflation will be in the spotlight with the Producers Price Index on Wednesday and the Consumer Price Index on Thursday.

Hope everyone has a great weekend and thank you for reading.