facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause

Weekly Update 07/10/2026: US Labor Market Remains Stable While Mortgage Rates Climb as Mideast Uncertainty Pressures Interest Rates

Insights

Please find our topical SGK Podcast on YouTube via the link here: https://youtu.be/KngvKHAI7Oo

And on Spotify here: https://open.spotify.com/episode/0QvtoqpwtdBPlHCVc8U0WV?si=Kh1rugF2TTGRahsAwAa5eA    

  • RTX has agreed to expand the AMRAAM missile program with NATO in Europe and US approves sale of long-range Tomahawk missiles to Germany
  • CACI wins contract to modernize the Department of Veterans Affairs' financial management systems 

Domestic Economic News  

Applications for US unemployment benefits were little changed last week, signaling layoffs remain limited. Initial claims decreased by 2,000 to 215,000 in the week ended July 4, a period that included the Independence Day holiday. The median forecast in a Bloomberg survey of economists called for 217,000 applications. Continuing claims, a proxy for the number of people receiving benefits, edged up to 1.81 million in the previous week, according to Labor Department data released Thursday. The low level of claims suggests employers remain reticent to lay off workers. That said, the June jobs report showed a slowdown in hiring in the month, taking some of the shine off recent momentum in the labor market. It also showed many Americans left the labor force, a shift that could also be consistent with fewer filings for unemployment. Before adjusting for seasonal factors, initial claims rose by nearly 10,000, almost entirely driven by an increase in filings in California.

US mortgage rates climbed to 6.49%, reversing last week’s drop, after President Donald Trump declared the ceasefire with Iran over, fueling concerns that renewed fighting may push up oil prices and keep borrowing costs elevated. The average for a 30-year, fixed loan rose from 6.43% a week earlier, Freddie Mac said in a statement Thursday. The rate was 6.72% a year ago. The war in Iran has rattled the property market since the conflict began in late February. The ceasefire had raised hopes that easing geopolitical tensions would help stabilize borrowing costs. This week’s escalation risks erasing that optimism. “Stubbornly high mortgage rates are a big part of what is holding buyers back from making 2026 a major improvement over the past few years of home sales, and the current situation in Iran may keep them higher for longer,” said Joel Berner, a senior economist at Realtor.com. Sales of previously owned US homes fell in June, with contract closings declining 2.4%, the National Association of Realtors reported Thursday. And the road ahead looks bumpy. Zillow slightly raised its forecast for mortgage rates to about 6.3% by the end of this year, slightly higher than what buyers saw in the fall and winter of 2025, turning last year’s affordability tailwind into a headwind. “Zillow’s forecast still points to a drift, not a drop,” said Kara Ng, senior economist at Zillow Home Loans.  

Sales of previously owned US homes slipped back in June, dragged down by stubbornly high mortgage rates that have kept the housing market stuck in a yearslong slump. Contract closings fell 2.4% to an annualized rate of 4.09 million last month, data released Thursday by the National Association of Realtors show. That fell short of the 4.2 million median estimate of economists surveyed by Bloomberg. “The back-and-forth in monthly home sales activity, driven by mild fluctuations in mortgage rates, shows how sensitive home buyers are to affordability conditions,” NAR Chief Economist Lawrence Yun said in a statement. But recent job gains will continue to provide support to the housing market, he added. The step-down in sales saps some of the recent momentum seen in the US home resale market. Both existing home sales and contract signings, which take place a month or two earlier than closings, had been trending up in recent months. However, with mortgage rates frozen near 6.6%, affordability remains a key challenge for Americans hoping to buy. NAR’s Housing Affordability Index, which measures whether typical families can qualify for a mortgage for a median-priced home, has improved somewhat from a year ago but is at its lowest since August 2025. Last month, the median sales price of a previously owned home rose 1.8% from a year ago to a record high of $440,600, NAR data show. While prices continue to climb, the advance is far smaller than the gains seen a couple years ago. Meantime, the inventory of existing homes for sale climbed 1.3% from a year earlier to 1.56 million. From a month earlier, however, it fell slightly for the first time this year. Yun called the annual gain “minuscule.” “We need to see 30%, 40%,” he said on a call with reporters. “We’re not seeing that.” Weakness in the US South, the nation’s biggest home-selling region, helped drag down the national results, with sales there declining 3.6% to an annualized 1.89 million. Sales also slipped in the Midwest and West, though they gained in the Northeast. First-time buyers accounted for 33% of sales in June, compared with 35% in May.  

Interest Rate Insight and the Fed

The Fed released minutes from its June 16–17 FOMC meeting on July 8. All officials unanimously voted to hold rates steady in the 3.50%–3.75% target range for the fourth consecutive meeting, though the minutes revealed meaningful internal divisions over the path ahead.  

Key Takeaways:

  • Rate hike discussion: A few officials saw a case for raising rates at the June meeting, though they ultimately supported the hold.
  • Inflation concerns elevated: A majority of participants flagged the risk that persistently high inflation could become entrenched in expectations. Most cited AI-driven demand as a key upside risk to inflation.
  • Labor market: Officials assessed the labor market as remaining stable in the near term, and worries over employment slightly receded relative to prior meetings.
  • Easing bias removed: The committee removed the so-called easing bias from its policy statement.
  • Statement format: A majority saw advantages to shortening the FOMC policy statement going forward.
  • Divergent rate path views: Officials analyzed multiple scenarios — including one where inflation eases and one where AI-driven demand keeps price pressures elevated — leaving the committee divided on the appropriate rate trajectory.  

Post-Minutes Fed Speak: New York Fed President John Williams said Thursday that AI-driven demand is now his primary inflation concern, and that if it creates a sustained impulse to demand relative to supply, the Fed would not look through it — implying rates may need to rise. He also emphasized that policy needs to remain data dependent.  

Market Pricing: As of July 9, OIS markets implied roughly 7.5 basis points of additional rate hikes for the July 29 meeting and approximately 12 basis points for the September 16 meeting, relative to the current effective fed funds rate of 3.62%.  

Bottom line: The minutes reflect a Fed that is on hold but increasingly tilted toward caution on inflation, with a small but notable faction open to resuming hikes — particularly if AI-related demand continues to fuel price pressures. 

Federal Reserve Governor Christopher Waller said signals from policymakers on the future path of interest rates can play a useful role if done carefully. Waller’s remarks at a conference in Rome sponsored by the Bank of Italy come as new Fed Chairman Kevin Warsh has vowed to move the central bank away from using so-called forward guidance and instead adopt an approach that is more attuned to changing economic data. Waller said forward guidance remains a valuable tool and helped guide the public during the pandemic-era inflation surge that interest rates were going to be increased. That led to tighter financial conditions even before the Fed hiked. Still, he said Fed officials have sometimes been too rigid in their use of forward guidance, on occasion tying their own hands. He cited the central bank’s signal in 2020 and 2021 that interest rates would remain on hold for some time, even as inflation took off. “I continue to believe that forward guidance can be a valuable tool that has, at times, significantly strengthened policymaking and will continue to be useful,” Waller said. “But forward guidance is more art than science, and there have been times when it has hindered, rather than helped, policymaking.” In a panel discussion after his remarks, Waller was asked for his view on Warsh’s pledge that the Fed will hit its 2% inflation target. “When you say re-commit let me be very blunt, I have never been anything but committed to a 2% target. The issue is how fast we get there,” he said. He later said he thinks Warsh was “re-affirming” the Fed’s commitment to hitting the target, rather than recommitting. “That’s the better way to think about the phrase ‘recommit,’” he said. Waller, who supported rate cuts in 2025 to bolster employment, said the labor market is showing signs of stabilizing, allowing policymakers to focus on inflation.

Impactful International News

German factory orders rebounded, which is encouraging news as the effect of the conflict in the Middle East on Europe’s biggest economy begins to fade. Demand rose 1.9% in May from a month earlier, following a revised decrease of 3.2% in April. The result exceeds the 1.1% gain seen by economists in a Bloomberg survey. The rise was due to transport equipment including for the military, likely reflecting Germany’s upgrade of its armed forces. Without large-scale orders the increase would have been 1%, Destatis said. A less volatile three-month reading showed a decline of 0.2%. “New orders in the manufacturing sector appear to be resuming the upward trend that began in the second half of 2025,” the Economy Ministry said in an emailed statement. “However, the trend remains highly volatile due to large orders. Furthermore, geopolitical uncertainty will remain high until the peace negotiations between the U.S. and Iran are finally concluded.” The report comes as Germany’s key manufacturers are struggling with US tariffs, weak demand in China and increased competition in Europe. Its economy had a good start to the year with 0.3% growth between January and March, but the Iran war and higher energy prices have weighed on  consumers and businesses. Even so, business surveys suggest the factory sector expanded slightly in May and June, partly due to orders being timed to avoid rising energy prices. The Bundesbank predicts economic output probably stagnated in the second quarter. To shore up the economy, Chancellor Friedrich Merz’s coalition announced a set of reforms on Thursday that includes attracting private capital. The government said it will also become more active in strategic industries and shield domestic capabilities. “The federal government’s reform package has brought progress on individual points, but no broad-based breakthrough,” said Joerg Kraemer, chief economist at Commerzbank. “We don’t expect a strong recovery in the coming months. On one hand, the Iran conflict still represents a source of uncertainty. On the other, companies continue to suffer from an erosion of the country’s attractiveness as a business location.”

Company Events

SGK writes additional weekly commentary for clients of the firm detailing recent events and earnings of core equity holdings.

Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Steigerwald, Gordon & Koch, Inc. [“SGK”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from SGK. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. SGK is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the SGK’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.sgkwealthadvisors.com. Please Note: SGK does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to SGK’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a SGK client, please contact SGK, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.