Overview: From their peak in late October, mortgage rates declined by well over 100 basis points during the final two months of 2023. After this impressive performance, without any significant economic surprises, rates have moved a little higher in the first week of the new year.
The minutes from the December 13 Federal Reserve meeting released on Wednesday contained no significant surprises. Officials confirmed that cuts in the federal funds rate are likely this year, but they offered little guidance on the timing. Instead, they again emphasized that future decisions will be based on incoming economic data and noted an “unusually high degree of uncertainty” about the future path of monetary policy. Most investors now expect that the Fed will begin cutting rates at the March meeting.
A significant economic report released this week from the Institute for Supply Management (ISM) again reflected the challenges for the manufacturing sector over the past year. The ISM Manufacturing Index was just 47.4, close to the lowest level since May 2020. Readings above 50 indicate an expansion in the sector, and readings below 50 indicate a contraction. This was the 14th straight month of readings below 50 — the longest streak in about 15 years.
The Job Openings and Labor Turnover Survey (JOLTS) report data indicated looser conditions in the labor market. At the end of November, there were 8.8 million job openings, the lowest level since March 2021. This equates to 1.4 openings for each available worker, down from around 2.0 only a few months ago. In addition, the "quits" rate was just 2.2%, down from about 3% at the end of 2021. Since people generally are more willing to voluntarily leave their jobs when they are optimistic about finding a better one, a lower quits rate is consistent with a looser labor market. Similarly, a lower number of openings suggests that companies face less pressure to raise wages in order to hire enough workers.
ISM Manufacturing Index
Week Ahead
Jan. 5
Employment Report
ISM Services Index
Jan. 11
Consumer Price Index
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