A Calmer Start But Will Rates Stay Volatile?

What's Happening Today

Markets are calmer this morning after two days of volatility. Oil prices are slightly lower after the U.S. announced it would support the oil industry by offering insurance guarantees and potentially naval escorts to help ships safely pass through the Strait of Hormuz.

While it is still unclear if oil companies will take the U.S. up on these offers, the announcement appears to be easing market concerns for now and helping stabilize mortgage rates this morning.

ADP Jobs Report Shows Mixed Labor Market

The ADP Employment Report for February showed that 63,000 jobs were created, slightly above the 50,000 expected, but the underlying details point to a softer labor market.

Key takeaways from the report:

February job growth: +63,000
January revised down to +11,000 from +22,000
Small businesses: +60,000 jobs
Medium businesses: -7,000 jobs
Large businesses: +10,000 jobs

Looking at the sectors:

Education and health services: +58,000 jobs
Construction: +19,000 jobs
Professional and business services: -30,000 jobs

Without the gains in education and healthcare, overall job growth would have been nearly flat, highlighting softness in economically sensitive sectors.

Wage Growth Signals Cooling Job Market

Wage growth data also suggests that the labor market may be losing momentum.

Workers staying in their jobs saw wages rise 4.5% year over year, unchanged from the prior report
Job switchers saw wage growth of 6.3%, down from 6.4% previously

The difference between job switchers and job stayers fell to 1.8%, the lowest premium on record since ADP began tracking the data. This suggests companies are becoming less aggressive about offering higher pay to attract workers, another sign that labor demand may be easing.

Mortgage Applications Rise as Rates Recently Fell

Last week’s Mortgage Application report from the Mortgage Bankers Association (MBA) showed how sensitive housing activity is to interest rates.

Average mortgage rates were 6.09%, near the lowest levels in about three years
Rates were 65 basis points lower than the same time last year

As a result, activity picked up significantly:

Purchase applications rose 6% and are now 10% higher year over year
Refinance applications jumped 14% and are 109% higher than last year

Rates have moved higher this week due to geopolitical tensions, which will likely show up in next week’s report. Still, the data demonstrates how quickly demand can return when mortgage rates improve.

Final Takeaway

Markets are calmer today after recent volatility, helped by lower oil prices and U.S. efforts to stabilize shipping through the Strait of Hormuz. Meanwhile, the ADP report showed modest job growth but also signs that the labor market may be cooling.

Housing activity responded quickly when mortgage rates recently dipped, showing how sensitive demand remains to rate movements. For now, we begin the day floating while watching whether yields remain contained near the 4.10% level.

If you want to understand how today’s market conditions could impact your home purchase or refinance plans, reach out to explore your options.