Job gains continued in October, with 261,000 additional people receiving W-2 statement salaries. There are almost one million more workers now compared to pre-pandemic. But if we consider all workers, including those on commission-based income, there were a net 328,000 job cuts in the past month and slightly fewer workers now compared to pre-pandemic. That is why the unemployment rate went up to 3.7%. The wage gain was 4.7%, well below the consumer price inflation of 8.2%.
The bond market is not liking the news as the yield on 10-year U.S. government borrowing rate rose to 4.2%. The bond market wants a clear picture of dissipating inflation from a lackluster labor market. Mortgage rates, therefore, could be nudged higher after a brief fall this week.
However, the mortgage rate could continue to fall if the gap with the government borrowing rate returns to its historical average spread of around 180 basis points. Currently, it is at 300 basis points. In other words, the 30-year mortgage rate could be at 6% today and not 7%. It's worth investigating why there is such a large spread.