Mortgage Rates Spike Again Due To Iran Conflict

What's Happening Today

Oil prices are moving higher again after additional attacks in the Strait of Hormuz and the Persian Gulf. The surge in energy prices is contributing to a selloff in both Stocks and Bonds as investors worry about potential inflation pressure.

Oil prices are now roughly 10 dollars higher since the start of the month, which has helped push Treasury yields higher. The 10-year Treasury has broken above the important 4.10 percent level after overnight weakness, signaling increased pressure on mortgage rates.

Job Cuts Signal Slowing Labor Market

Recent layoff data suggests the labor market may be gradually cooling.

The Challenger report showed nearly 50,000 job cuts in February
January layoffs were unusually high and the largest January total since 2009
Layoffs during the first two months of the year are the fourth highest since 2009
About 8 percent of layoffs this year are being attributed to artificial intelligence
Hiring plans total only 18,000 so far this year, which is down 56 percent from last year

These numbers suggest companies are becoming more cautious with hiring as economic uncertainty grows.

Additional Employment Data Shows Broad Weakness

Other labor market reports are also showing signs of softening.

Revelio Labs reported 17,000 job losses in February
Retail trade and leisure and hospitality experienced the largest job losses
Healthcare added about 16,000 jobs and was the biggest area of growth
53 percent of industries reported job losses

This indicates the slowdown in hiring is becoming widespread across multiple sectors.

Jobless Claims Show Slower Rehiring

Weekly unemployment claims continue to show mixed signals in the labor market.

Initial jobless claims remained unchanged at 213,000
Continuing claims increased by 46,000 to 1.87 million
Continuing claims are now approaching 1.9 million

While new layoffs remain relatively low, the rise in continuing claims suggests it is taking longer for unemployed workers to find new jobs.

Productivity Remains a Bright Spot

Productivity growth continues to provide some positive news for the economy.

Fourth quarter productivity rose 2.8 percent compared to the 1.9 percent expected
Third quarter productivity was revised higher to 5.2 percent
Strong productivity helps limit inflation by allowing businesses to produce more output

However, labor costs are also increasing.

Unit labor costs rose 2.8 percent versus the 2 percent expected
This follows a decline in labor costs during the previous quarter

Rising labor costs alongside strong productivity is somewhat unusual and will be an important trend to watch.

Markets Focus on Tomorrow’s Jobs Report

The biggest market event this week will be tomorrow’s February Jobs Report.

Economists expect around 60,000 new jobs to be created
The unemployment rate is expected to remain at 4.3 percent
Markets are also watching for potential revisions to January's data

Mortgage rates will likely react to this report, as weaker job growth could support lower rates while stronger data could push them higher.

Final Takeaway

Rising oil prices are creating short term upward pressure on mortgage rates, while several labor market indicators suggest the job market may be cooling. With the February Jobs Report arriving tomorrow, markets are waiting for clearer signals on the direction of interest rates.

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