Latest economic data for the U.S. are a mixed bag with the economy slowing for the second straight quarter – a traditional sign of a recession – and the stock market falling some 500 points early Thursday. Mortgage rates are climbing toward 7% – bad news for housing. However, the jobs market remains strong.
Here’s the latest:
The US economy shrank by 0.6% during the second quarter of the year, according to the latest gross domestic product estimate from the Bureau of Economic Analysis released Thursday.
That matches the most recent GDP estimate and shows the economy was in contraction for the entire first half of the year as businesses readjusted to pandemic-era supply chain disruptions.
The latest scorecard on the economy may reignite the debate as to whether the United States has been in a recession, commonly defined as two consecutive quarters of negative growth. However, the official arbiter is a panel of National Bureau of Economic Research economists, who take an array of economic indicators into consideration and can revise the data many years later.
Jobless claims fall
The number of first-time claims for unemployment benefits dropped considerably last week, underscoring how employers are holding on tightly to workers as the labor market remains full of opportunities for job hunters.
Initial claims for unemployment insurance were 193,000 for the week ended September 24, down 16,000 from a downwardly revised total of 209,000 claims from the prior week, according to Labor Department data released Thursday.
Economists had forecast 215,000 weekly applications would be filed, according to estimates on Refinitiv.
The last time weekly claims fell below 200,000 was in early May 2022.
Dow falls more than 550 points and is back in a bear market
The month of September and third quarter of the year are about to end — and investors are wishing the past nine months good riddance. Stocks fell Thursday, giving up much of Wednesday’s big gains. The Dow was down more than 550 points, or about 1.9%, in early trading.
The Dow is now back in bear market territory, more than 20% below the all-time high it set in January. The S&P 500, one of the broadest measures of the health of Corporate America, fell 2.4% Thursday and has plunged about 24% this year.
The tech-laden Nasdaq Composite sank 3% Thursday and has plummeted even more than the Dow and S&P in 2022. Major stock exchanges in the UK, Europe and Asia have all dropped sharply this year as well.
The stock market had a promising start to the quarter, soaring in July. But fears about inflation, rate hikes, rising bond yields and recession returned with a vengeance in August and September.
Mortgage rates surge, closing in on 7%
The 30-year fixed-rate mortgage averaged 6.70% in the week ending September 29, up from 6.29% the week before, according to Freddie Mac. That’s the highest level since July 2007.
Mortgage rates have more than doubled since the start of this year as inflation soared and led the Federal Reserve to hike borrowing costs. The central bank’s unprecedented campaign to fight inflation has concerned investors and roiled bond markets.
“The uncertainty and volatility in financial markets is heavily impacting mortgage rates,” said Sam Khater, Freddie Mac’s chief economist.
The average mortgage rate is based on a survey of conventional home purchase loans for borrowers who put 20% down and have excellent credit, according to Freddie Mac. But many buyers will pay more.