Mixed Data

With the lack of major economic data due to the government shutdown, investors continued to react to the reports from private companies this week. The services sector of the economy was stronger than expected, but the labor market displayed signs of softening. These results were roughly offsetting, and mortgage rates ended the week with little change.

The latest survey on consumer sentiment published by the University of Michigan revealed that consumers remain quite concerned about the impact of higher tariffs and the government shutdown. The index dropped to just 50.3, far below the consensus forecast of 53.0 and the lowest level since June 2022 (which was the record low of 50.0). The component of the report on inflation expectations showed that the five-year average outlook unexpectedly fell, which was good news for mortgage markets.

With the lack of government economic data during the shutdown, investors continue to look for alternative information from private companies. Two such reports released this week revealed concerning news about the labor market. First, layoffs soared in October, according to a large outplacement firm. Job cuts increased a massive 183% from September, the highest level for the month of October since 2003. This has been the worst year for layoffs since 2009. In addition, jobs site Indeed reported that job postings fell to the lowest level since February 2021 during the pandemic. Fewer postings suggest less competition for workers, meaning that companies are less likely to offer higher pay to attract additional employees. This reduces future inflationary pressures from wages, which is positive for mortgage markets. 

Looking ahead, investors will continue to watch for additional information about tariffs and monitor comments from Fed officials for hints about monetary policy later in the year. With the government shutdown, it will likely be another light week for major economic data. If it is released on schedule, the focus will be on CPI on Thursday. The Consumer Price Index (CPI) is a widely followed monthly inflation indicator that looks at the price changes for a broad range of goods and services. Mortgage markets will be closed on Tuesday for Veterans Day.