Mortgage Rates and Economic Data For Week Ending January 7, 2023

Stock markets higher to begin the year - Stock markets ended the week higher. Investors shrugged off another strong jobs report and focused on lower wage growth in December than in November. Analysts also feel that next week's CPI report will show that inflation is continuing to moderate. Expectations of lower inflation in the future brought down long-term bond and mortgage rates this week. If the CPI report on Tuesday shows the inflation rate continues to drop, stocks will do well, and long-term rates will drop. If the inflation rate increases from November levels, stocks will fall, and rates will rise. Investors are holding their breath for Tuesday but are optimistic. The Dow Jones Industrial Average closed the week at 33,630.61, up 1.5% from 33,147.25 last week. The S&P 500 closed the week at 3,895.08, up 1.5% from 3,839.50 last week. The NASDAQ closed the week at 10,596.29, up 1.2% from 10,466.48 last week. 

U.S. Treasury bond yields - The 10-year treasury bond closed the week yielding 3.55%, down from 3.88% last week. The 30-year treasury bond yield ended the week at 3.67%, down from 3.97% last week. 

Mortgage rates - The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of January 5, 2023, were as follows: The 30-year fixed mortgage rate was 6.48%, up from 6.42% last week. The 15-year fixed was 5.73%, up from 5.68% last week. The survey is done early in the week. By Friday, the 30-year had dropped to about 6.25%. Barring a high CPI inflation report, next week's survey rates will be lower. 

The U.S. economy added 223,000 new jobs in December - The unemployment dropped to a 60-year low - The Department of Labor and Statistics reported that 223,000 new jobs were added in December. That was about 23,000 more jobs than analysts expected. The unemployment rate dropped to 3.5%, a 60-year low. In December, the labor-force participation rate (the share of workers with a job or actively looking for an appointment) was 62.3%. It was at 63.4% before the pandemic. Average hourly wages increased by 4.6% from one year ago. That was a lower wage increase than expected, but still much higher than the Fed target of 3%. Unfortunately, the good news is terrible these days. The Fed wants to slow down the pace of hiring and wage growth to slow consumer spending and curb inflation. The lowest unemployment rate since the 1960s won't discourage consumers from spending. It also makes finding workers more competitive. There are almost two open jobs for every person seeking a job. That pushes wages higher and encourages more consumer spending. The Fed intends to raise interest rates until hiring slows aggressively and the unemployment rate rises to a more neutral level, above 4%.