Weak Job Growth Hasn’t Been Enough to Lower Mortgage Rates
September’s employment report showed a clear slowdown in hiring. Employers added just 29,000 jobs, the unemployment rate increased slightly to 4.2%, and average hourly earnings rose only 0.1%.
Payroll growth for July and August was also revised lower by a combined 60,000 jobs.
Those results reduced expectations that the Federal Reserve will raise its benchmark rate again at its October meeting. Even so, mortgage rates remain under pressure.
Freddie Mac’s latest national survey put the average 30-year fixed mortgage rate at 7.28% as of October 1, up from 7.03% the previous week. The average 15-year fixed rate increased from 6.42% to 6.60%.
These are national survey averages rather than individual quotes, but they illustrate the broader direction of the market.
Why Didn’t Rates Improve More?
The Federal Reserve does not directly set mortgage rates. Mortgage pricing is influenced more closely by longer-term bonds, including the 10-year Treasury.
That yield remained near 5.28% Monday morning despite the weaker employment report.
Investors are still weighing several concerns:
- Inflation remains above the Federal Reserve’s target
- Energy prices remain elevated
- The federal government continues to borrow heavily
- A large supply of Treasury debt must be absorbed by investors
- The Fed may still raise rates again later this year
A softer jobs report addresses one piece of the puzzle, but it does not eliminate those other pressures.
Monday: Services Activity
Monday brings the S&P Global and ISM services reports. The ISM Services Index is expected near 55, compared with 55.4 in August.
Because services account for most U.S. economic activity, investors will pay particular attention to employment, new orders and business costs.
Moderate growth with easing prices would generally be better for mortgage rates than strong activity accompanied by rising costs.
Wednesday: Federal Reserve Minutes
The week’s main scheduled event arrives Wednesday afternoon, when the Federal Reserve releases minutes from its September 15–16 meeting.
The Fed raised its benchmark rate by a quarter percentage point at that meeting, bringing its target range to 3.75%–4.00%.
The minutes should provide more detail about how officials view inflation, employment and the possibility of additional rate increases.
Markets will be trying to determine whether September’s increase was viewed as a one-time adjustment or the beginning of a longer tightening cycle.
Thursday: Another Look at Employment
Initial Jobless Claims are forecast near 200,000, compared with 197,000 the previous week.
Claims remain low, showing that employers are not broadly laying off workers even though monthly hiring has slowed.
Federal Reserve officials Christopher Waller and Alberto Musalem are also scheduled to speak. Their comments may help markets interpret Wednesday’s meeting minutes.
Friday: Consumers and Inflation Expectations
Friday’s preliminary University of Michigan Consumer Sentiment report is expected near 48, compared with September’s final reading of 48.1.
The headline confidence reading is important, but the survey’s inflation expectations may matter more for mortgage rates.
In September, consumers’ expected inflation over the next year increased to 4.6%, while longer-term expectations rose slightly to 3.4%.
Lower expectations would be encouraging for the Federal Reserve and the bond market. Another increase could reinforce concerns that inflation is becoming entrenched.
What This Means for Buyers and Homeowners
The weak September jobs report gave the Fed a reason to proceed carefully, but high Treasury yields show that the broader rate picture remains complicated.
Mortgage rates can improve without a Fed rate cut, and they can also remain high when the Fed stays on hold. The bond market is constantly looking ahead and adjusting for inflation, economic growth and government borrowing.
If you are buying a home or considering a refinance, the best approach is to look at the payment, timeline and available options rather than waiting for one specific report to solve the rate environment.