Today, we look at jobless claims and a fall in mortgage rates.
Initial claims for unemployment totaled 744,000 last week, up from 728,000 the prior week, and higher than the 694,000 Dow Jones estimate. This was the second straight week initial claims rose, and the first time since the end of January that the four-week moving average increased.
I know that may sound bad, but there was also some good news in the report. Continuing unemployment claims fell to their lowest level since March 21, 2020.
Many economists also believe the recent elevation in claims is due in part to filing backlogs and fraud. How else could you explain how initial claims are rising, at a time when hiring is booming in the U.S.?
So while we wish initial claims were lower, this data is not enough to take us down from the high of the March employment report released last week. The most recently passed stimulus, combined with the surge in vaccinations, should keep companies hiring at a rapid pace for the next several months, or at least until they pass yet another stimulus.
Rates for 30-year conforming mortgages averaged 3.13% last week, down five basis points from the prior week. This was the first time in eight weeks that mortgage rates didn’t increase.
Freddie Mac attributed this drop in rates to the “modest decline of U.S. Treasury yields.” The question is whether Treasury yields will continue to decline. Based on how much money Washington is borrowing, and the surging U.S. economy and money supply, I wouldn’t bet on it.
Inflation is picking up, and will continue to take rates with it. That doesn’t mean rates will skyrocket, but the days of 30-year fixed mortgages under 3% are probably gone for a while. But remember these two things:
- Rates are rising because the economy is booming right now, which is the way it should work.
2. Inflation hasn’t been a real problem in the U.S. since the early 1980s.
The Line will be on vacation next week, and will return on Wednesday, April 21. Have a great weekend!