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Waiting Game is Over & Rates are Moving – Dec 9th
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Last week, it looked like mortgage rates were holding steady, but the real test was waiting for this week’s jobs report. Spoiler alert: THEY PASSED!
The jobs report, officially called "The Employment Situation," is a big deal because no other economic report has as much power to move rates up or down. This month’s report was SUPER important because it could clear up some mixed signals we’ve been getting lately. Plus, the timing was critical since everyone’s wondering if the Fed will cut rates on December 18th.
The report has two main parts:
- The number of jobs added to the economy (aka "nonfarm payrolls" or NFP)
- The unemployment rate
The jobs report showed 227k jobs were added, but a lot of that came from workers returning after strikes or hurricanes.
Let’s break it down even more. The average job count for the first half of the year was 255k per month, but the second half has dropped to 148k. That’s not a terrible number, but it shows the job market is cooling off.
Then there’s the unemployment rate. It’s now at 4.2%, which is the second highest since the pandemic lockdowns. While 4.2% is still low historically, unemployment doesn’t change direction quickly, so it’s clear the labor market is cooling compared to last year.
This cooling is one reason the Fed started cutting rates back in September. Markets tend to predict these decisions, so rates often move before the Fed makes it official. That’s likely what’s happening now.
This week also included comments from Fed officials, like Waller, who said he’s leaning toward voting for a rate cut in December.
When it comes to mortgage rates, the key indicator is the 10-year Treasury yield, not the Fed’s short-term rate. Treasury yields and weaker economic data, like Wednesday’s ISM Services index, have been good news for rates.
Mortgage rates have been dropping since the jobs report and are now the lowest they’ve been in over a month and a half.
Next week, we’ll get an even better idea of what’s coming. The Consumer Price Index (CPI), which tracks inflation, drops on Wednesday. Inflation is the Fed’s main focus, so everyone will be watching to see if it stays flat or starts moving back toward target levels. Either way, the markets will react, and we’ll get a glimpse of what rates will do before the Fed meets the week after.
Take a look at the graphs for further insight ------->