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.

Bar graph: Payroll Jobs, January 2020 to October 2022
Bar graph: All Jobs, January 2020 to October 2022
Line graph: Consumer Price Inflation and Wage Growth, January 2020 to October 2022
Line graph: 30-Year Mortgage Rate February, 1990 to February 2022
Line graph: 10-Year Treasury Yields and 30-Year Mortgage Rates, January 1990 to January 2022
Line graph: Abnormal Spread 10-Year Treasury and 30-Year Mortgage, January 1990 to January 2022

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