John's Finance Corner: Inflation Steady, But Labor Signals Are Mixed
Last week’s Personal Consumption Expenditures (PCE) report—the Fed’s preferred inflation gauge—came in largely as expected. Overall inflation rose 0.3% in August, nudging the annual rate from 2.6% to 2.7%. Core PCE, which excludes food and energy, increased 0.2% for the month and held steady at 2.9% year-over-year. That’s still well above the Fed’s target of 2%, but the pace remains manageable.
The Fed continues to walk a tightrope between its two mandates: price stability and full employment. That tension was evident in the September 17th rate cut, where policymakers cited rising downside risks in the labor market. The next few labor reports—especially the September jobs report due October 3rd—will be critical in shaping the Fed’s next move at its October 29th meeting. If a government shutdown occurs, however, that report may be delayed, adding another layer of uncertainty.
Labor Market: Encouraging Signs or Warning Flags?
Initial jobless claims fell to 218,000 last week, marking the second straight decline after reaching a four-year high. Continuing claims also dipped slightly to 1.926 million. While the drop in new claims is encouraging, the fact that continuing claims have stayed above 1.9 million for 18 consecutive weeks suggests it’s taking longer for people to find new jobs—a possible sign of a cooling labor market.
GDP Rebounds, But Mortgage Rates Stay Volatile
The final estimate for second-quarter GDP showed the U.S. economy grew by 3.8%, up from the previous 3.3% estimate. That’s a sharp rebound from the 0.6% decline in Q1, which was largely driven by a surge in imports ahead of potential tariffs. Averaging both quarters, the economy is growing at a modest 1.6% pace for the year.
After the Fed’s rate cut on September 17th, mortgage rates briefly dipped. But the following day, stronger-than-expected jobless claims data pushed bond yields—and mortgage rates—back to pre-cut levels. This week’s labor data could once again shift the landscape.
What to Watch This Week
Tuesday brings the Job Openings and Labor Turnover Survey (JOLTS), followed by ADP’s private payroll report Wednesday and weekly jobless claims Thursday. Friday wraps up with the Bureau of Labor Statistics’ September employment report—unless a government shutdown delays its release. Without that data, markets may struggle to find direction, leaving mortgage rates in limbo.
Need help navigating the uncertainty?
Let’s connect. I’m here to help you interpret the data and explore how today’s trends could shape your next move.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
