Rising Inflation

With little significant economic news, it was a relatively quiet week for mortgage markets. A second-tier inflation indicator was much higher than expected, but its impact was minor. Mortgage rates fell slightly to their lowest levels since September 2022.

Core PPI was 3.6% higher than a year ago, up sharply from an annual rate of 3.3% last month and the highest level since March 2025. Core PPI remains well above the 2.0% target level of the Fed. However, the reaction was small since investors tend to place a lot more weight each month on the Consumer Price Index report, which better reflects overall inflation levels in the economy.

The Department of Labor releases the total number of new claims for unemployment insurance each week. The latest reading was just 212,000, below the consensus forecast. Bigger picture, this was far below the inflated figures seen during the early months of the pandemic, and in line with the levels which were typical during the solid labor market in 2019. Weekly jobless claims are important because they are one of the timeliest indicators of labor market trends. While other recent economic reports suggest that companies may be scaling back on hiring new employees, this report indicates that they remain reluctant to lay off workers. The data also showed that the median duration of unemployment is near four-year highs, and jobs for young college graduates are hard to find. 

While lower mortgage rates have significantly boosted refinancings, economic uncertainty and affordability issues continue to constrain purchasing activity, according to the Mortgage Bankers Association. Applications to refinance rose 4% from last week and were a massive 150% higher than one year ago. Purchase applications fell 5% from the prior week but still were up 12% from last year at this time.

Looking ahead, investors will continue to monitor comments from government officials about tariffs and from Fed officials for hints about future monetary policy. For economic reports, the ISM national manufacturing sector index will be released on Monday and the services sector index on Wednesday. The key Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation are always closely watched.