Erratic reports dominate our news cycle: Last week we had “good news” regarding the labor market, this week we have bad news regarding unemployment, mediocre news with inflation, and bad news with mortgage rates. So what’s going on? We were told that the economy is strong, and Yahoo! Finance even upgraded this to an “A” economy. But for some reason, we keep getting contradictory reports regarding the state of the economy. Today, the Consumer Price Index Summary shows a 0.2% price increase month-over-month, with July-September all increasing at the same rate. Also today, the Department of Labor showed that unemployment claims for the week of October 5th were 258,000, which was an increase of 33,000 from the previous week. And to top it off, it was announced that mortgage rates are at 6.32%, the highest since the first week of September.
So what really is going on? Let’s dive in, and break each one down.
Adding Jobs While Increasing Unemployment Claims?
Last week everyone was celebrating the great news on employment. Today, the news is bad – unemployment claims are up. The Department of Labor stated, “In the week ending October 5, the advance figure for seasonally adjusted initial claims was 258,000, an increase of 33,000 from the previous week’s unrevised level of 225,000. This is the highest level for initial claims since August 5, 2023 when it was 258,000. The 4-week moving average was 231,000, an increase of 6,750 from the previous week’s unrevised average of 224,250.”
The above chart shows unemployment claims since October 2023. The trend has been moving slightly upwards, albeit, not by much. 2024 has been a weird year for job reporting in general. A few months ago we were hit with some major bad news regarding unemployment, while the last few weeks have seemed rather positive. Regardless of the reports and news, we know that unemployment is still high enough to be of concern for many. Unfortunately, long-term unemployment (27+ weeks) is up, but some institutions are still adding jobs. Last weeks good news showing that payroll employment increase by over 250,000 was dampened with a few ancillary statistics, including the fact that part-time employment is up for those looking for full-time employment, and was tampered by the news this week.
Inflation – Good or Bad News?
Inflation has been of concern over the last few years, but it has slowed in 2024. The latest CPI report shows a 0.2% increase in inflation for September. Yahoo! Finance gave an “A” grade to the economy but to some confusing results.
(Note, while this picture from yahoo!finace is a critique of political administrations, the article is not.)
As we can see in the above chart, inflation is at its highest since the late 1970s-early 1980s. If we break down the data even more, we can see where the inflation has come from.
The above chart is from the U.S. Bureau of Labor Statistics. We can see that gasoline is as erratic as ever, but there has been a steady increase in the cost of many food items over the last few years. Again, we can see some progress in 2024, as inflation has slowed, or in the case of gasoline, prices have dropped.
Mortgage Rates Are Up?!
Yes, mortgage rates have been increasing each week ever since the initial dip when the Fed announced rate drops in September.
Average mortgage rates for a 30-year loan are up from 6.09% on September 19th, to 6.32% today. A 15-year loan is up from 5.15% to 5.41% in the same timeframe. So why are the rates up after the Federal Reserve dropped rates a few weeks ago? Some speculate that rates are up due to the perceived positive job reports all through September. Wrap your head around that one.
So Which is it: Bad News or Good News?
The answer is this: the news is not necessarily great, and it is not necessarily the worst. Unfortunately, there are no strong trends one way or another. The information has been difficult to understand and digest because of biased takes on the economic news. Anytime there is good news, you will see some saying “See, we’re doing good work!” And then where there is bad news, you will see the opposite reaction from those who oppose: “Look, our economy is failing us!” That rhetoric can be difficult for the average person who just wants to read the news and understand what is going on.
So what should you do? For one, do not overreact to any news. It is important to build financial literacy while also building a strong budget and building investments and savings for retirement. The economic news today is closer to a negative trend than a positive one, but that should not impact the way you live your life. With strong decision-making regarding your spending and savings, you should be able to fight through the weakest of economies.