Blog posted On April 10, 2023
Mortgage rates slipped down to two-month lows in the beginning of last week, primarily a result of the Job Openings and Labor Turnover Survey (JOLTS) from February. For the first time in two years, the survey showed that job openings fell below a level of 10 million. Markets took this as a sign of a tightening labor market, which is positive news for bonds and therefore rates. Things took a turn later in the week with the release of the employment situation.
Economic data over the first three days of last week was generally weaker than expected. This was good news for rates. “Bonds benefit from weak data because a slower economy is less capable of sustaining growth and inflation – two of the main pillars of interest rates,” notes Matthew Graham of Mortgage News Daily. Though the number of job openings was still very high, it supported the theory of an overall downward trend. Since the beginning of last year, job openings have been trending lower from their peak of 12 million.
However, JOLTS wasn’t the only market-moving survey last week. An arguably more influential release was the employment situation. The employment situation is a collection of labor market reports including payroll data, the participation rate, and the unemployment rate. While JOLTS underperformed, the employment situation reports were largely in line with expectations. Job creation was solid, unemployment ticked lower, and the labor force grew to its largest level in three years. Overall, this collection of reports reflected not a weak labor market, but a strong (and growing) market. Consequently, bonds repriced, and rates climbed slightly higher.
Still, rates ended the week hovering near the lowest levels in over a month. The consumer price index (CPI) might have a say in this come Wednesday. The CPI is the most highly followed method of measuring inflation levels. Inflation has been one of the most important factors influencing rate trends over the past year.
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Sources: Bloomberg, Mortgage News Daily