top of page

Wild Week

Overview: Mortgage markets went on a wild ride over the past week. After climbing to their highest levels of the year due to strong labor market data, rates later sharply reversed course when the latest inflation figures were weaker than expected. The net result was that mortgage rates ended a little lower.


The monthly Employment Report revealed that job growth is slowing, but the unemployment rate is still extremely low and wage growth remains strong. The economy added just 209,000 jobs in June, below the consensus forecast of 240,000, and negative revisions reduced the results for prior months by 110,000. This was the smallest monthly increase in jobs since December 2020. On the other hand, the unemployment rate declined from 3.7% to 3.6%, matching expectations. Average hourly earnings, an indicator of wage growth, increased 0.4% from April, above the consensus forecast and 4.4% higher than a year ago. Fed officials focus on wage growth because it generally raises future inflationary pressures.

In June, the Consumer Price Index (CPI), one of the most widely followed inflation indicators, was 3% higher than a year ago, below the consensus forecast and down from an annual rate of 4% last month. This was the smallest annual rate of increase since March 2021. A significant decline in energy prices was the primary reason for the drop. Shelter (housing) costs remained stubbornly high and will be a key factor in determining the future path of inflation.

To reduce short-term volatility and get a better sense of the underlying trend, investors often prefer to look at core CPI, which excludes the food and energy components. In June, core CPI was 4.8% higher than a year ago, also below the consensus forecast. While this annual rate has fallen from a peak of 6.6% in September 2022, it remains far above the readings around 2% seen early in 2021, which is the stated target level of the Federal Reserve. Investors still anticipate that the Fed will increase the federal funds rate by another 25 basis points at its next meeting on July 27, but they are divided about whether there will be a second rate hike later this year.


Core CPI (annual % change)

Week Ahead

July 18 — Retail Sales report

July 19 — New Residential Construction report (also known as Housing Starts)

July 20 — Existing-Home Sales report


bottom of page