John’s Finance Corner: Inflation and Labor Market Data
Two main factors drive the bond market and mortgage rates: inflation data and labor market trends. Last week, we received valuable insights from the Consumer and Producer Price Index reports, as well as the latest job openings data. Here’s my breakdown of what these numbers mean for you:
Inflation Trends Moving in the Right Direction
The Consumer Price Index (CPI), which measures inflation on a consumer level, brought some encouraging news:
- Headline CPI rose by 0.2% month-over-month, while the year-over-year reading declined from 3% to 2.8%.
- Core CPI (excluding food and energy prices) mirrored this trend, with a 0.2% monthly increase and a drop from 3.3% to 3.1% annually.
The Producer Price Index (PPI), which measures wholesale inflation, showed similar improvements:
- Headline PPI fell from 3.7% to 3.2% year-over-year, thanks largely to lower energy prices.
- Core PPI dropped 0.1% month-over-month and declined from 3.8% to 3.4% annually.
These signs of cooling inflation are typically favorable for the bond market, which helps keep mortgage rates in check. That said, the upcoming Personal Consumption Expenditure (PCE) report later this month is something to watch. PCE is the Federal Reserve’s favorite measure of inflation and often factors in components like healthcare costs that could make the report less favorable than recent data.
Labor Market Signals: Mixed Impacts on Rates
The JOLTS report for January showed job openings increased from 7.5 million to 7.7 million—higher than expected. While this indicates solid demand for workers, other areas paint a more complicated picture:
- The hiring rate of 3.4% is at its lowest point in over a decade, making job searches more challenging.
- The quit rate of 2.1% reflects reduced confidence in employees’ ability to secure new opportunities.
These mixed signals contribute to a murkier outlook for labor markets, which remain a crucial driver of bond market trends.
What to Watch This Week
Last week, bond markets held steady, leaving mortgage rates largely unchanged. This week, attention turns to the Federal Reserve’s meeting, particularly Chairman Powell’s speech on Wednesday afternoon, where he will outline plans for monetary policy moving forward. His comments will have a direct influence on bond markets and, in turn, mortgage rates.
As always, staying informed about these economic indicators is key to making sound decisions in the mortgage market. If you have questions about how current trends might impact your plans—whether buying, refinancing, or just exploring your options—don’t hesitate to reach out. I’m here to help you make well-informed decisions that fit your financial goals.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
