Economic update for the week ending November 5, 2022

The U.S. economy added 261,000 new jobs in October – The Department of Labor and Statistics reported that 261,000 new jobs were added in October. The unemployment rate inched up to 3.7%, just off the 60-year low of 3.5% last month, and back to its 3.7% rate in August. The labor-force participation rate (the share of workers with a job or actively looking for a job) dropped slightly to 62.2% from 62.3% in September. Average hourly wages increased 4.7% from one year ago. The number of new jobs created was above what experts had expected, and about the same as the initial report of 263,000 new jobs created in August that was revised to 315,000 today. The Federal Reserve has stated that they intend to keep increasing rates until the overheated jobs market cools. This is a report we will be looking closely at to determine the course of the Fed.

Stock markets down for the week – The Fed led the week with its 4th consecutive .75% interest rate hike, as well as comments which frightened investors who felt that future rate hikes would be moderating. When speaking about inflation Chairman Powell pointed to the labor market as a key contributor. He said “the labor market continues to be out of balance, with demand substantially exceeding the the supply of available workers.” With consumer spending accounting for nearly 70% of the U.S. economy, the Fed has focused on cooling the labor market with the hopes consumers pull back on their spending. While it seems like a historically low unemployment rate is a good thing, as long as workers have no fear of not finding employment, they will keep spending which will continue to fuel inflation. The Dow Jones Industrial Average closed the week at 32,403.22, down 1.4% from 32,861.80 last week. It is down 10.8% year-to-date. The S&P 500 closed the week at 3,770.55, down 3.4% from 3,901.06 last week. The S&P is down 20.9% year-to-date. The NASDAQ closed the week at 10,475.26, down 5.6% from 11,102.45 last week. It is down 32.1% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week, yielding 4.17%, up from 4.02% last week. The 30-year treasury bond yield ended the week at 4.27%, up from 4.15% 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 November 3, 2022, were as follows: The 30-year fixed mortgage rate was 6.95%, down from 7.08% last week. The 15-year fixed was 6.29%, down from 6.36% last week. The 5-year ARM was 5.95%, unchanged from 5.96% last week.