Author: Eric BernsteinPublished:
Last week was not a great one for mortgage rates. The labor market came in stronger than expected across the board, with job openings, private payrolls, and the main jobs report all beating forecasts. All the declines in mortgage rates we saw 2 weeks ago disappeared as the chances of a fed hike grew after seeing the labor data.
The average rate on a 30-year fixed rate conventional loan rose to 6.51%. See what rates we're offering by signing up for our Friday rate texts.
Our LendFriend Learning Center now has over 300 articles to help homebuyers buy with confidence. Check out our top articles of the week at the bottom of this email.
Jobs Data Fuels Rate Hike Concerns
Labor data stole the show this week, and none of it was helpful for rates. A weaker jobs market usually gives the Fed more cover to cut rates, but all three major jobs reports came in stronger than expected, suggesting the labor market is better than expected. After last week, the market now believes there's a 72% chance of a rate hike by the end of the year.
JOLTS: Job openings surged to 7.6 million in April, well above the 6.8 million expected and the highest level since May 2024. That’s a clear sign that demand for workers remains strong, although hiring itself slowed, showing that companies may still be cautious about actually bringing people on.
ADP: Private payrolls also beat expectations, with companies adding 122,000 jobs in May versus the 110,000 expected. The gains were broader than we’ve seen recently, with hiring spread across most major sectors instead of being concentrated in just healthcare.
The Big Labor Report: Friday’s jobs report was the real market mover. The U.S. added 172,000 jobs in May, nearly double the 88,000 economists expected, while unemployment stayed flat at 4.3%. Wage growth also remained a concern, because strong job growth plus rising pay can keep inflation pressure alive. That strong report fueled bets on a Federal Reserve rate hike at some point this year, as the labor market stabilizes amid high inflation. Traders are now fully pricing in a rate hike from the central bank by the end of the year, even as President Trump continues to call for cuts as Kevin Warsh, his appointee to chair the Fed, takes the helm.
Beige Book Shows Families Are Feeling the Squeeze
The Fed’s latest Beige Book painted a pretty ugly picture for working families. The Beige Book is a report the Federal Reserve releases eight times a year that gathers real-world feedback from businesses, banks, employers, and community leaders across the country. It’s not just hard data; it’s what people are actually seeing and feeling on the ground, which makes it useful for understanding how the economy is impacting households before it fully shows up in the numbers.
This edition showed that middle- and lower-income households are feeling squeezed by higher prices, using credit cards more often, cutting back on retail spending, and prioritizing necessities like groceries and gas. Higher-income households, on the other hand, remain much more resilient, creating what looks like a “K-shaped” economy where wealthier Americans are holding up while everyone else falls further behind.
The report also pointed to rising cost pressures from the Middle East conflict, especially through higher energy, shipping, fertilizer, and food costs. That matters for inflation because businesses facing higher input costs often try to pass those costs on to consumers, which keeps pressure on the Fed to stay cautious.
What to expect this week?
This is an inflation-focused week for rates. After last week’s stronger labor reports pushed against hopes for lower rates, markets now turn to CPI and PPI to see whether inflation is still moving in the wrong direction.
Monday is quiet with no major reports scheduled.
Tuesday brings small business optimism, trade balance, existing home sales, and wholesale inventories.
Wednesday is the big one: CPI. Headline inflation is expected to rise to 4.2% year-over-year, (which is HIGH relative to where we've been since 2023) while Core CPI is expected to tick up to 2.9%. A hotter report would likely push mortgage rates higher, while a softer report could help rates recover.
Thursday brings PPI and initial jobless claims. PPI will show whether businesses are still facing higher input costs that could eventually get passed on to consumers.
Friday wraps up with consumer sentiment, which will show how households are feeling after months of elevated prices, high rates, and economic uncertainty.
The key takeaway: CPI and PPI will drive the week. Better inflation data could help rates move lower, but another hot report would make lower rates harder to justify.
I'm always here to help so if you have any questions or just want to learn more, schedule a call or connect with me here.
.png?width=1200&height=244&name=Homebuyer%20Tools%20Header%20(10).png)
