Hiring Is Rising Along With Rates. Are They on a Collision Course?

Heather Mahmood-Corley, a real estate agent, was seeing decent demand for houses in the Phoenix area just a few weeks ago. But as mortgage rates pick up again, she is already watching would-be home buyers retrench.

“You’ve got a lot of people on edge,” said Ms. Mahmood-Corley, a Redfin agent who has been selling houses for more than eight years.

Mortgage rates and other key borrowing costs have climbed sharply since the middle of the summer, adding to an increase that had already taken place in response to Federal Reserve policy rate moves since early 2022.

The latest run-up in interest rates started in financial markets, and it has come in part because economic growth has proved so much stronger than expected. That has prompted investors to believe that the Fed may need to keep rates elevated for longer to tamp it down.

America’s economy retains surprising oomph a year and a half into the Fed’s campaign to slow the economy. Employers added 336,000 jobs last month, sharply more than the 170,000 economists had predicted, emphasizing just how solid the job market remains.

But the recent pop in longer-term rates could spill out from markets to curb that strength in the real economy. Higher interest rates — and especially climbing yields on the all-important 10-year Treasury bond — make it more expensive to finance a car purchase, expand a business or borrow for a home. They have already prompted pain in the heavily indebted technology industry, and have sent jitters through commercial real estate markets.