9/8/2023
 

Services Sector Shines

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There was little major economic news during the short holiday week. The economic data generally was stronger than expected, and mortgage rates ended the week slightly higher.

 

The most significant economic report released this week from the Institute of Supply Management revealed unexpected strength in the important services sector, which accounts for more than two-thirds of the economy. The ISM national services sector index increased to 54.5, well above the consensus forecast and the highest level since February. Readings above 50 indicate an expansion in the sector, and this was the eighth straight month in which the index exceeded that level.

 

The Department of Labor releases the total number of new claims for unemployment insurance each week, and the latest reading was just 216,000, the lowest since February. This was down significantly from the inflated figures seen during the early months of the pandemic and close to the levels which were typical during 2019. While some other recent economic reports such as job openings have suggested some easing of the tightness in the labor market, the data on jobless claims has remained consistently strong.

 

Higher rates have caused mortgage application volumes to fall to the lowest levels in 28 years. According to the latest data from the Mortgage Bankers Association (MBA), purchase applications are down 28% from last year at this time, and applications to refinance are down 30% from one year ago. Of note, more buyers are turning to adjustable-rate mortgages in an effort to reduce monthly payments.