The unemployment rate unexpectedly dropped in January – The Department of Labor and Statistics reported that 143,000 new jobs were added in January. While that was a little below expectations, the unemployment rate ticked down to 4% in January from 4.1% in December. The Fed has been trying to slow the economy and hiring to get the job market more balanced. Like everything else, when you have more jobs available than workers looking for jobs, wages go up. Last August the unemployment rate had risen to 4.2% and it seemed that the Fed was achieving its goal of slowing hiring. In September they began lowering rates in fear that the economy was slowing too quickly, but since then the economy has picked up steam and so has hiring, which has caused the unemployment rate to drop. The lower the unemployment rate, the fewer workers there are for available jobs which causes wages to rise. Average hourly wages increased 4.1% year-over-year in January, up from a 3.9% year-over-year increase in December. The Fed is pointing to higher wages as being a large contributor to inflation because more people with more money fuel consumer spending, which pushes prices higher.
Stock markets – The Dow Jones Industrial Average closed the week at 44,303.40, down 0.5% from 44,544.66 last week. It is up 4.1% year-to-date. The S&P 500 closed the week at 6,025.99, down 0.2% from 6,040.53 last week. The S&P is up 2.4% year-to-date. The Nasdaq closed the week at 19,523.40, down 0.5% from 19,627.44 last week. It is up 1.1% year-to-date.
U.S. Treasury bond yields – The 10-year treasury bond closed the week yielding 4.49%, down from 4.58% last week. The 30-year treasury bond yield ended the week at 4.69%, down from 4.83% 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 6, 2025, were as follows: The 30-year fixed mortgage rate was 6.89%, down from 6.95% last week. The 15-year fixed was 6.05%, down from 6.12% last week.
The graph below shows the trajectory of mortgage rates over the past year.
