Friday’s Jobs Report Won’t Shake Up the Mortgage Market. Here’s Why
Why a “strong” labor market can’t also mean affordable mortgage interest rate?
Friday, Bureau of Labor Statistics released a jobs report for November that was generally viewed as positive. Although the unemployment rate rose slightly from 4.1% to 4.2%, job growth was strong, with the United States adding 227,000 new jobs last month. Friday’s data were broadly in line with investor expectations, meaning the 10-year Treasury yield – a key benchmark for home loan rates – and mortgage rates likely won’t increase much more than they do now. But that’s not much help for potential homebuyers facing high borrowing costs.
inflation and employment data provide insights into the overall health of the economy, affecting FedIts mission is to control inflation and maximize employment, adjusting interest rates upward or downward.
While the central bank does not directly set home loan rates, its monetary policy affects borrowing costs across the economy. Since the Federal Reserve began raising interest rates in early 2022, mortgage interest rate More than doubled. many Hope mortgage rates will ease After the Federal Reserve began cutting interest rates this fall, interest rates fell to 6%. But after the central bank cut interest rates by 0.5% on September 18, a stronger-than-expected jobs report helped home loan rates rise back to nearly 7%.
In the real world, a strong labor market is a good thing because more people have jobs and the economy is stable. But it also makes it more likely that the Fed will keep interest rates high in 2025.
Although investors still have expectations Cut interest rates by another 0.25% The bigger question at the Fed’s Dec. 17-18 policy meeting is how future economic data will affect the pace and extent of rate cuts next year.
“If the economy keeps growing, or even accelerates, the Fed will be unlikely to continue cutting interest rates,” he said. Ari WolfeChief Economist at Zonda. for potential home buyersmeaning mortgage rates won’t drop below 6% for some time.
Read more: Weekly Mortgage Forecast
The relationship between economic data and mortgage rates
If you follow Mortgage Rate Trendsyou’ve heard that the direction of interest rates depends on a combination of upcoming economic data and decisions from the Federal Reserve.
While a single data point can never be decisive, when inflation is high, the Fed typically raises interest rates to curb borrowing and reduce the money supply. The trick is not to slow demand so much that it would lead to a sharp rise in unemployment or a recession. Then, when unemployment is high, such as during a recession, the Fed typically lowers interest rates to stimulate economic activity.
Essentially, key indicators – inflation and labor market growth – indicate how the economy is doing. These signals affect investor expectations and appetites, triggering a chain reaction in the bond market. The first impact is on the value of government debt, which affects other bond markets such as mortgage bonds. Mortgage bonds, also known as mortgage-backed securities, typically move in tandem with the 10-year Treasury note.
When bond yields are higher, the bonds are worth less in the market where investors buy and sell the securities, causing mortgage rates to rise. When yields are lower, the value of bonds increases and mortgage rates fall.
Weak employment data (i.e. rising unemployment) tends to cause bond yields to fall, while strong labor force data pushes bond yields higher.
TL;DR: Every monthly jobs report is economic data that affects bond investors, and the bond market and the housing market are closely linked.
How jobs data will impact mortgage rates in 2025
While predicting where the housing market will go next is challenging, one thing is certain: A strong economy and a stable labor market make it difficult for the Fed to cut interest rates, so mortgage interest rate The decline may not be as rapid as potential homebuyers hope.
At its upcoming policy meeting in two weeks, the Fed will release its latest summary of economic forecasts, which outlines Fed officials’ expectations for future interest rates. this Current versionLast updated in September, four rate cuts were expected in 2025. But considering this President-elect Donald Trump’s Economic Policies With inflation expected to pick up again, many experts predict the next iteration of cuts will be even smaller.
Although the unemployment rate has increased since last year (from 3.7% to 4.2%), the job market is gradually cooling, and experts do not believe that the economy will fall into a jobless recession at this time.
As for 2025, the labor market under the second Trump administration is an uncertain factor, and changes in the workforce may vary by industry.
Limitations of official labor data
The Bureau of Labor Statistics’ monthly jobs report includes job losses, wage growth, job openings, productivity and more. While aggregate data may paint a broad picture of the economy, some experts say national aggregate data don’t accurately reflect which regions, populations and industries have been more negatively impacted.
For example, the official unemployment rate is 4.2%, but that figure does not include people who have given up looking for work or are no longer able to work. However, this figure counts “underemployed” workers (those in part-time, contract or temporary positions) as employed.
Read more: Unemployment statistics are misleading. Economic difficulties become more severe
Advice for home buyers
The direction of mortgage rates is not permanent. Next month’s data could tell a different story about the labor market and inflation risks. If inflation continues to fall and the labor market slows, that could provide some room for mortgage rates to fall.
While the economic factors that affect mortgage rates and home prices are outside of your control, here are some steps you can take Build your credit score, pay off debt and Save more for your down payment to help you Secure the best mortgage rate for your case.
