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If you're waiting for mortgage rates to come down, you want to be paying attention to what is happening with inflation and the economy. Unfortunately, figuring out where the economy is heading in 2024 is not an easy task. We've been saying for a while that mortgage rates will start making meaningful progress lower once we enter a recession, but the economy has been surprisingly resilient even in the wake of the most aggressive interest rate hikes in history. As it stands at the start of 2024, the U.S. is still not currently in a recession, according to the traditional definition (a significant decline in economic activity that is spread across the economy and lasts more than a few months). The job market remains one of the U.S. economy's main engines, with the nation's unemployment rate near a 50-year low and wages finally pulling ahead of inflation. At the same time, major companies in technology, finance, media and other key sectors have all recently announced sizable job cuts, with layoffs nationwide more than doubling in January from a month earlier. This positive jobs report and continued delay of an economic downturn has given even more credence to those who believe the Federal Reserve will be able to achieve a "soft landing" for the economy - raising interest rates just enough to slow the economy and reduce inflation without causing a recession. But is the U.S. labor market really as "healthy" as the headlines say? Let's find out. January Jobs Reports Show Conflicting Numbers In their analysis of the most recent labor data from The Bureau of Labor Statistics (BLS), MBS Highway notes that January's jobs report might not be the blockbuster that it appears to be on the surface. The BLS reported that there were 353,000 jobs created in January, which was nearly double expectations. Revisions to November and December also added 126,000 jobs in those months combined. According to MBS Highway, while the headline job growth figure for January appears strong on the surface, future revisions lower are a very real possibility. January is always a heavily adjusted month, as new benchmarks, seasonal adjustments and population controls play a big role in calculating the data. The Household Survey, where the Unemployment Rate comes from, is considered more real-time because it’s derived by calling households to see if they are employed. This survey has its own job creation component and it told a completely different story, showing 31,000 job losses. Average weekly hours worked also declined to the lowest level since 2010 (excluding the pandemic). This is important because one of the ways businesses cut costs is to cut the number of hours worked. On average the entire labor force is working 30 minutes fewer per week, which equates to 2.4 million job losses on its own. What's more, ADP’s Employment Report showed that private payrolls began 2024 slower than expected, with employers adding just 107,000 new jobs in January.

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