Inflation Eases In September
Inflation cooled to 2.1% in September, approaching the Federal Reserve's 2% target, with the personal consumption expenditures (PCE) index increasing by 0.2% monthly and hitting 2.1% annually. Excluding food and energy, core inflation stood at 2.7% year-over-year, driven by a rise in services prices and a dip in goods prices. Meanwhile, personal income and consumer spending increased by 0.3% and 0.5%, respectively, while the personal saving rate dropped to its lowest level this year at 4.6%. Despite inflation nearing the Fed's target, labor market stability remains a priority, with initial unemployment claims falling and the employment cost index up 0.8% in the third quarter.
Job Growth Impacted by Hurricanes and Boeing Layoffs
October saw the weakest U.S. job growth since late 2020, with nonfarm payrolls rising by just 12,000 due to strikes and hurricane impacts. The unemployment rate held steady at 4.1%, while average hourly earnings increased 0.4% for the month, in line with annual gains of 4%. The Bureau of Labor Statistics highlighted significant disruptions from the Boeing strike and hurricanes, which likely contributed to the lower-than-expected job gains and substantial downward revisions to previous months' figures. Despite this, markets remain optimistic, with analysts predicting the Federal Reserve will implement further interest rate cuts to support the economy.
Mortgage Rates Rise
Mortgage rates increased for the fourth time in five weeks, pushing the 30-year fixed rate to 6.73% and dampening refinancing activity, which fell 6% for the week. Although refinance applications dropped, they remain 84% higher than a year ago, given the significant rate decrease over that period. In contrast, mortgage applications for home purchases rose by 5% for the week and 10% year-over-year, driven by increased homebuyer interest as housing supply grows. However, rates have since climbed above 7%, with experts cautioning that volatility is likely to continue due to the upcoming jobs report, election, and Federal Reserve announcement.
