That encouraged some buyers to lock in their rates in anticipation of rates going higher, which turned out to be true. Mortgage rates in August spiked to 7.22%, the highest in more than 20 years, dampening sales of new homes.
With inflation rebounding and the Federal Reserve contemplating another interest rate hike in November, mortgage rates should continue to put a strain on the housing market.
And with the UAW strike, a looming government shutdown and some student loan payments restarting, there are downside risks to economic growth and the labor market. Those risks might be enough to keep the Federal Reserve from hiking its policy rate one more time.
Consumer confidence
American consumers are not as optimistic as before, according to data released by the Conference Board on Tuesday, and that does not bode well for growth. Consumers are expecting fewer jobs, lower incomes and, as a result, reduced spending over the next six months, according to data released by the Conference Board on Tuesday. Read more of RSM’s insights on the economy and the middle market. The income index—which measures the difference between incomes that have increased and those that have decreased—fell to 1.9, the lowest since last November. For the time being, job gains improved slightly, according to the survey results. The labor differential index—which measures the difference between jobs that are plentiful and job that are hard to get—inched up to 27.3 from 26.7.
But the index has been on a clear downtrend since February, staying below the 2019 level, before the pandemic, for two months in a row.
We expect September’s jobs report, which will be released next week, to show a slowing labor market given the current economic conditions.
