Economic update for the week ending October 8, 2022

The U.S. economy added 263,000 new jobs in September – The unemployment rate dropped to a 52-year low – The Department of Labor and Statistics reported that 263,000 new jobs were added in September. The unemployment rate dropped to 3.5%, a 52-year low, from 3.7% in August. The labor-force participation rate (the share of workers with a job or actively looking for a job) increased slightly to 62.3%. It was 62.4% in August, 62.1% in July, and 63.6% before the pandemic. Average hourly wages increased 5% from one year ago. More open jobs than workers looking for work is pushing wages up at a higher pace than we have seen in decades because businesses have to compete for workers rather than workers competing for jobs. In September, there were 1.7 job openings for every applicant, down from 2.1 jobs for every applicant last month. The unexpected drop in the unemployment rate, and wages continuing to rise led to a sell-off in stock markets after the report was released.

Stock markets were higher this week despite a steep sell-off on Friday – Stock markets had a huge rally to begin the week. They ended the week higher even though the Dow fell 630 points or 2.1%, the S&P fell 2.8% and the NASDAQ fell 3.8% on Friday after another hot jobs report was announced. With unemployment at a 52-year low investors fear another .75% rate hike at the next Fed meeting. The Fed has made cooling the overheated job market a priority because people with no fear of becoming unemployed shop and spend money. Consumer spending accounts for nearly 70% of the U.S. economy. More people spending leads to higher prices, which fuels inflation. The Dow Jones Industrial Average closed the week at 29,296.79, up 1.9% from 28,725.51 last week. It is down 19.4% year-to-date. The S&P 500 closed the week at 3,639.66, up 1.5% from 3,585.23 last week. The S&P is down 23.6% year-to-date. The NASDAQ closed the week at 10,652.79, up 0.7% from 10,575.62 last week. It is down 32% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week, yielding 3.89%, up from 3.69% last week. The 30-year treasury bond yield ended the week at 3.86%, up from 3.61% last week. We watch bond yields because mortgage rates often follow treasury bond yields.

Mortgage rates – The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of October 6, 2022, were as follows: The 30-year fixed mortgage rate was 6.66%, almost unchanged from 6.70% last week. The 15-year fixed was 5.90%, down from 5.96% last week. The 5-year ARM was 5.36%, up from 5.30% last week. Rates were higher at the end of the week. Next week’s rates will be higher.