(NEW YORK) — Concerns about inflation have increasingly turned to concerns about the job market. Last month’s weaker than expected jobs report led to turmoil in stocks.
The U.S. added 142,000 jobs in August, according to the Bureau of Labor Statistics report on Friday. The figure was lower than expectations.
The reports showed a slowing but steady job market. The unemployment rate fell to 4.2%.
Jobs were added in construction and health care, according to the Bureau of Labor Statistics. July and June numbers were revised to show 86,000 fewer jobs than previously reported.
While these numbers are lower than expected, and do show a weakening job market, for now, this is still an economy that is adding a decent number of jobs. Given this latest data, the Fed is still on track to cut interest rates at its next meeting on Sept. 18.
Fed Chair Jerome Powell last month said “the time has come” to lower interest rates.
Powell indicated the Fed would soon bring interest rates down from a 23-year high. The shift could lower borrowing costs for everything from credit cards to auto loans to mortgages.
While the unemployment rate remains historically low, it ticked up to 3.8% last month. A sharp downward revision of job growth estimates in June and July lowered those totals by a combined 110,000 jobs.
(NEW YORK) — Mortgage rates this week dropped to their lowest level in more than a year, delivering some long-sought relief for homebuyers.
The average interest rate for a 30-year fixed mortgage stands at 6.47%, Freddie Mac said on Thursday. That figure marks a drop of more than a percentage point from a peak attained last year after the Federal Reserve hiked interest rates in an effort to fight inflation.
The Fed has held interest rates steady at their highest level in two decades, however. So, why are mortgage rates plummeting?
Experts who spoke to ABC News attributed the drop to a widely held expectation that the Fed will begin to cut interest rates at its next meeting in September. A weaker-than-expected jobs report last week bolstered those expectations, triggering a drop in yields for 10-year treasuries, which in turn sent mortgage rates plummeting, they added.
The yield on a 10-year Treasury bond, or the amount paid to a bondholder annually, fell sharply last week after the Fed signaled a coming interest rate cut and a disappointing jobs report days later appeared to affirm such expectations. Mortgage rates closely track the movement of 10-year treasuries.
“These 10-year treasury rates are going to directly translate into lower mortgage rates, part of which we’re observing in the recent data,” Julia Fonseca, a professor at the Gies College of Business at the University of Illinois at Urbana-Champaign, told ABC News.
The chances of an interest rate cut in September are all but certain, according to the CME FedWatch Tool, a measure of market sentiment. Market observers are split roughly down the middle about whether the Fed will impose its typical cut of a quarter of a percentage point or opt for a larger half-point cut.
“That jobs report made markets reevaluate the path of future interest rate cuts,” Lu Liu, a professor at the Wharton School at the University of Pennsylvania who studies real estate, told ABC News.
“Because the mortgage rates are priced off of current treasury rates, the treasury rates have already incorporated these expectations for future rate cuts,” Liu added.
Experts disagree about the outlook for mortgage rates, since the trajectory depends on future economic performance and the Fed’s response to it, which can prove difficult to predict, they said.
The economy has been gradually cooling for months, alongside falling inflation. The U.S. has repeatedly defied previous warnings of an impending recession, though economists disagree about whether current conditions pose an impending risk.
Stijn Van Nieuwerburgh, a professor of real estate at Columbia University Business School, said he expects the economic slowdown to continue. That will trigger interest rate cuts and falling mortgage rates, he added.
“We’ve reached peak interest rates,” Nieuwerburgh told ABC News. “Mortgage rates are likely to come back down for the next several years.”
However, he acknowledged the difficulty of predicting economic outcomes and the possibility of a reversal that could lead to interest rate hikes. “Never say never,” Nieuwerburgh said.
Liu, of the University of Pennsylvania, said market observers will closely watch incoming data to determine whether the recent jobs report is part of a larger trend indicating an accelerated economic slowdown.
For months, many observers have expected a “soft landing,” in which inflation returns to normal while the economy averts a recession. However, the steeper-than-expected cooldown of the labor market may indicate that the economy is headed toward a downturn after all, Liu said.
“People are concerned that the risk of a hard landing has increased,” Liu said. “Right now, it’s a wait-and-see moment.”
Still, the current drop in mortgage rates may not rekindle the housing market, experts said, citing a phenomenon known as the “lock-in effect.”
While mortgage rates have fallen, they remain well above the rates enjoyed by most current homeowners, who may be reluctant to put their homes on the market and risk a much higher rate on their next mortgage. In turn, the market could continue to suffer from a lack of supply, keeping home prices at elevated levels, said Fonseca, of the University of Illinois at Urbana-Champaign.
As of March, roughly 60% of homeowners carried a mortgage rate at or below 4%, Fonseca added.
“We still might see those borrowers reluctant to give up those mortgage rates,” she said. “If they’re locked in, we might not see very much movement.”
(NEW YORK) — Slow and steady may win the race for a tortoise vs. a hare, according to Aesop’s Fables. However, in reality, this turn of phrase does not ring true when applied to the gradual climb of consumer prices, especially with the latest exorbitant cost increases on items like eggs.
Egg prices soar nearly 20% since last year
The latest data from the Bureau of Labor Statistics showed prices on some household staples rose slightly slower than the overall rate of inflation, but food prices once again spiked upwards in July by 2.2% compared to last year.
Despite a dip in prices for rice, flour, and fish, the cost of a carton of eggs has been steadily on the rise, with a 19% increase from July 2023.
Since June, the price of eggs shot up 5.5% month-over-month.
The consistent increases have been attributed to a combination of factors, largely including a supply-driven price spike as a result of avian flu outbreaks that have wreaked havoc on poultry farms nationwide.
Earlier this spring, with a resurgence of highly pathogenic avian influenza (HPAI) in egg-laying flocks, the United States Department of Agriculture’s Animal and Plant Health Inspection Service reported that 13.64 million table egg-laying hens had been lost to the disease since the beginning of November.
(NEW YORK) — Delta apologized for its widespread cancellations and delays over the last several days, issuing a new message Wednesday to customers affected by the fallout from the global IT outage last Friday.
The airline also says it plans to issue 10,000 bonus miles and offers to reimburse “reasonable expenses.”
“Please accept our sincere apologies for the disruption to your recent travel plans caused by a vendor technology outage affecting airlines and companies worldwide,” the airline said. “Delta teams have been working tirelessly to restore our operation to get our customers safely to their final destinations. We understand that unexpected disruptions like this are difficult for everyone and do not reflect the operational reliability and experience you have come to know and expect from us.”
Delta also said that if passengers incurred “any hotel, meal, or transportation expenses while in transit resulting from this flight disruption,” they may submit a claim to the airline for a reasonable expenses reimbursement.
“Please note that we do not reimburse prepaid expenses, including but not limited to hotel reservations at your destination, vacation experiences, lost wages, concerts, or other tickets,” Delta said.
The apology comes several days after a wave of IT outages swept across the globe on Friday morning, causing thousands of flight cancellations and stalling internal and external systems across a variety of industries including hospitals, banks, stock exchanges and other institutions, as some Microsoft-based computers ceased to work.
Thousands of flights were canceled in the U.S. after American Airlines, United and Delta asked the Federal Aviation Administration for a global ground stop on all flights.
At least 2,537 flights were canceled and 8,376 were delayed in the U.S., FlightAware data reported last Friday.
“Please know that we deeply value you and your experience as our customer. Despite this unexpected disruption to our operations, we are doing everything possible to ensure your future travel meets the high service and reliability standards that Delta is known for,” the airline said. “We appreciate your trust in us and look forward to providing an exceptional experience to you on your next Delta flight.”