Mixed Labor Market and Inflation Data

What Is Happening Today

Mortgage rates are holding relatively steady this morning as markets navigate a push and pull between conflicting economic data. Stocks are lower while mortgage bonds are slightly higher, though still off their best levels of the day. Overnight gains were supported by strength in European bonds and a softer ADP employment report, but those gains have been partially offset by a stronger than expected ISM Services reading.

Overall, markets appear to be transitioning out of holiday mode, with participation picking up and reactions becoming more data driven. While the broader trend still points toward a cooling labor market, mixed signals across reports are keeping rates contained as investors wait for clearer confirmation from upcoming releases.

Labor Market Update (ADP)

41,000 jobs were added in December, below expectations of 50,000
Medium sized businesses accounted for most of the job growth, adding 34,000 jobs
Large companies added just 2,000 jobs, signaling hesitation among more insulated employers
Professional and business services lost jobs, while gains were concentrated in education, health services, and leisure and hospitality
If education, health, and leisure are excluded, the rest of the economy saw net job losses
Wage growth held steady at 4.4% for job stayers and accelerated to 6.6% for job switchers

Despite month to month noise, job creation continues to trend lower, reinforcing the view that the labor market is gradually weakening.

Job Openings and Hiring Trends (JOLTS)

Job openings fell to 7.15 million, well below expectations of 7.6 million
October openings were revised lower to 7.45 million
This marks the lowest level of job openings since late 2020
The hiring rate dropped to 3.2%, tying the lowest level since 2011 excluding pandemic distortions
The quits rate rose slightly to 2.0%, but remains historically weak

JOLTS data continues to confirm reduced labor demand and slower hiring momentum across the economy.

Service Sector Activity

ISM Services rose to 54.4, stronger than expectations and the prior reading
New orders and employment moved back into expansion territory
Only 11 of 18 industries reported increased activity, showing limited breadth
Prices paid declined, signaling easing inflation pressures
Seasonal holiday demand may have temporarily boosted activity

While the headline number was strong, underlying details suggest uneven growth rather than a broad based reacceleration.

Mortgage Demand Snapshot

Average mortgage rates declined to 6.25%, roughly 0.75% lower than a year ago
Purchase applications are up 10% year over year
Refinance activity surged 108% compared to last year
Refinances now make up 57% of total mortgage applications

Lower rates for longer are clearly translating into increased borrower activity, particularly on the refinance side.

Bottom Line

Mortgage rates remain range bound as investors weigh clear signs of labor market softening against pockets of economic resilience. ADP and JOLTS continue to show slowing job growth and reduced hiring demand, while ISM Services reminds markets that parts of the economy remain active, at least for now.

With trading volume returning and key labor data still ahead, markets are likely to become more responsive as the week progresses. For the moment, rates are holding steady, but the next meaningful move will depend on whether upcoming reports reinforce the cooling labor trend or challenge it.