“Mortgage rates surged this week on the strength of the latest employment report,” said Orphe Divounguy, senior macroeconomist at Zillow Home Loans. “Although inflation continued to ease at the end of 2023, revisions to employment data suggest the labor market isn’t cooling as fast as previously thought, and wage growth remains well above a level that is consistent with the Federal Reserve’s two percent inflation target.

“Although higher wage growth would be encouraging news, it also comes with the risk that consumer price inflation will be difficult to keep around the Federal Reserve’s target. However, a deeper dive into the jobs report revealed a less rosy picture: total hours worked fell, contributing in part to the increase in average hourly earnings.

“A resilient labor market is good for housing. If layoffs remain low, and core inflation continues to moderate, mortgage rates aren’t expected to rise further. Housing market activity should rebound modestly this spring – meaning more listings coming on the market and more sales.

“Mortgage rates bottomed in the last week of December and have trended up ever since. Market participants will be looking to next week’s consumer price index report for signs that inflation is still headed in the right direction.”