Economic Update | Week Ending March 2, 2024

Next Friday the Department of Labor and Statistics will release the February jobs report. Investors are eagerly awaiting what those numbers will look like. The Fed has stated that slowing job growth is their number one priority to combat inflation. It looked like job growth was slowing last year, but January’s job gains were double the amount expected. People ask, “why would the Fed want the unemployment rate to rise?” My best answer is, do you know a restaurant that’s having trouble staying open, or an accountant, attorney, or any business that they can’t find help? We have been at the lowest unemployment rate since the 1960’s for almost two years. That shortage of labor has wages rising at a much higher rate than the inflation target level. When people make more, they spend more. More competition for goods drives prices up. The Fed’s goal is to get the labor market more balanced. Having more jobs than applicants is not a sustainable labor market. After last month’s surging job growth mortgage rates increased and the Fed’s likelihood of dropping rates from their 24-year high levels became more unlikely in the coming months. If job creation slows mortgage rates will drop and the Fed will be able to begin lowering rates.

Stock markets – The Dow Jones Industrial Average closed the week at 39,087.38, down 0.2% from 39,151.53 last week. It is up 3.7% year-to-date. The S&P 500 closed the week at 5,137.08, up 1% from 5,088.80 last week. The S&P is up 7.7% year-to-date. The Nasdaq closed the week at 16,274.94, up 1.7% from 15,996.82 last week. It is up 8.4% year-to-date.

U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 4.25%, almost unchanged from 4.26% last week. The 30-year treasury bond yield ended the week at 4.38%, almost unchanged from 4.37% last week. We watch bond yields because mortgage rates follow bond yields.

Mortgage rates – Every Thursday Freddie Mac publishes interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of February 15, 2024, were as follows: The 30-year fixed mortgage rate was 6.94%, up from 6.90% last week. The 15-year fixed was 6.26%, down from 6.29% last week.

The graph below shows the trajectory of mortgage rates over the past year.

Freddie Mac was chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing. Their mandate is to provide liquidity, stability, and affordability to the U.S.

Have a great weekend!