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- Initial unemployment claims fell last week, pulling the four-week average lower and indicating that the U.S. labor market remains stable.
- The 30-year fixed mortgage rate climbed to 6.65%, driven by rising inflation and growing uncertainty about Federal Reserve rate policy.
- Elevated gas prices, Middle East tensions, and inflation concerns drove consumer sentiment to an all-time low in May.
1. Unemployment Claims Ease as Labor Market Holds Steady
New unemployment insurance claims declined last week, with seasonally adjusted initial claims coming in at 209,000, down 3,000 from the prior week.1 The four-week moving average, which smooths out week-to-week swings, also fell to 202,500 from 204,000 the week before.1
The number of workers receiving benefits held near recent levels. Seasonally adjusted insured unemployment rose modestly to 1,782,000 for the week ending May 9th.1 The four-week average for continuing claims fell to 1,773,000. The insured unemployment rate held steady at 1.2%.1
On an unadjusted basis, actual initial claims totaled 185,625, a decline of roughly 3% from the week prior.1 That compares favorably to 200,637 claims filed during the same week one year ago.1 Together, the data suggest the labor market continues to operate at a measured, broadly stable pace heading into late May.
2. Mortgage Rates Move Higher amid Persistent Inflation Concerns
Home loan rates moved higher last week, with the national average on a 30-year fixed-rate mortgage rising to 6.65%, according to Freddie Mac, and the 15-year fixed-rate mortgage averaging 5.99%.2 Both rates were up from the week prior and higher than they were seven days earlier.
The increase follows an April inflation reading of 3.8% — the highest level since early 2023.3 Elevated inflation tends to push mortgage rates upward, and it has deterred the Federal Reserve (Fed) from cutting its benchmark rate thus far in 2026. The Fed held rates steady for the third time this year at its most recent meeting, after three consecutive cuts in the second half of 2025. Some market observers now expect the Fed’s next move could be a rate increase rather than a cut.
Mortgage rates briefly dipped below 6% in late February and early March, their lowest point in more than three years, before climbing back toward current levels.2 Fannie Mae, which previously forecasted rates falling as low as 5.70% in 2026, now projects they will remain above 6% for the rest of the year.4
For buyers active in the current market, locking in a rate sooner rather than later may be worth considering if rates continue to rise.
3. Rising Prices and Global Uncertainty Push Consumer Sentiment to Record Low
Consumer confidence fell sharply last week, reaching its lowest recorded level. The University of Michigan’s monthly sentiment survey declined to 44.8 in May, down from 49.8 in April, the lowest final reading on record at the time.5 A preliminary May estimate came in at 48.2, indicating that conditions deteriorated as the month progressed.5
The decline in confidence extended across income levels and demographic groups. Lower-income households and those without college degrees reported the sharpest drop in confidence. High-living costs were widely cited as a strain on personal finances.
Economic observers were particularly focused on the rise in long-run inflation expectations. Survey respondents now expect inflation to run at 3.9% over the long-term, up from 3.5% in April.5 Elevated long-run inflation expectations can influence consumer behavior and wage demands, which, in turn, may affect actual inflation levels going forward.
Despite the grim mood, retail sales and personal spending have remained relatively resilient in recent months.
For the period ending 5/22/26.
* Small-cap stocks are represented by the Russell 2000® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.
Sources
1 U.S. Department of Labor, Unemployment Insurance Weekly Claims News Release, May 21, 2026
2 Freddie Mac, Primary Mortgage Market Survey, May 22, 2026
3 U.S. Bureau of Labor Statistics, Consumer Price Index News Release, May 12, 2026
4 Fannie Mae, Housing Forecast, May 2026
5 University of Michigan, Surveys of Consumers, May 22, 2026
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A Composite PMI is a single index that tracks economic activity by combining the performance of both the manufacturing and services sectors, providing a comprehensive overview of overall business conditions.
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The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending. The CPI is a measure of inflation and deflation. The CPI report uses a different survey methodology, price samples, and index weights than the producer price index (PPI).
Additional Disclosures: International and Foreign Securities, Fixed Income Investments, the Consumer Price Index, the Producer Price Index.
Comparative Index Descriptions: The Standard & Poor’s (S&P) 500 Index, The Russell 2000® Index, The NASDAQ Composite Index, The MSCI EAFE Index, Dow Jones Industrial Average® (Dow Jones or DJIA), The Bloomberg Barclays US Aggregate Bond Index (US Agg Bond), The CBOE Volatility Index (VIX). CSP2026001_21
