CHM Blog

The jobs report that didn't move mortgage rates

Payrolls smashed expectations by nearly triple the forecast. Markets responded with a shrug. Jake Krimmel's reporting for Realtor.com explains the disconnect, and why it says more about the Fed's priorities than the jobs report itself.

Payrolls jumped 162,000 in August, blowing past the consensus range of 53,000 to 65,000, while unemployment held steady at 4.1% instead of ticking up to 4.2% as most economists expected. Wage growth landed exactly on forecast, up 0.3% for the month after a dismal 0.1% reading in July.

The revisions told an even better story. June's initial number got bumped up to 31,000, and July, originally reported as a loss of 23,000 jobs, is now showing a gain of 21,000. Put together, the three-month average payroll gain now sits at 71,000, a meaningful jump from the 50,000 average pace over the prior 12 months. By almost any measure, this was a strong report following two genuinely weak ones.

What makes the story interesting isn't the number itself. It's what happened to Fed rate-hike odds afterward, which was essentially nothing. Heading into this report, markets had been whipsawed for weeks. Fed Chair Kevin Warsh's hawkish Jackson Hole speech last week swung hike odds 21 percentage points in a matter of minutes, from 36% up to 57%.

Just last Thursday, Governor Waller pushed back with comments favoring a hold, pulling odds back down 13 points. Given that volatility, a payroll beat this large, combined with two months of prior weakness getting erased by revision, looked like exactly the kind of data that should move markets sharply. Instead, hike odds for the September 15-16 meeting ticked up just 0.2 percentage points, landing at 52.6%.

That non-reaction is the real headline. After weeks of markets swinging on every Fed comment, an unambiguously strong jobs report barely registered a pulse. Krimmel reads that as a clear signal about which half of the Fed's dual mandate actually matters right now. It's inflation, not employment, driving the committee's thinking, which puts enormous weight on this week's CPI report as the last major data point before the September meeting.

For housing, Krimmel doesn't expect last Friday's report to shift much on its own. Most buyers and sellers right now aren't tracking unemployment figures or wage growth statistics. They're watching mortgage rates, home prices, and trying to decide whether now is the moment to jump in or reprice a listing that's been sitting awhile.

The picture heading into fall isn't encouraging. August's housing data showed pending sales growth turning negative for the first time since last November, and mortgage rates touched a fresh 2026 high last week. There is a silver lining buried in the pricing and delisting trends, which suggest buyer and seller expectations are converging more closely than they have in a while, even if actual sales volume hasn't picked up to match.

If July's housing market was coasting along, August decelerated, and Krimmel expects that slowdown to continue into fall, partly for normal seasonal reasons and partly because mortgage rates are trending the wrong direction rather than offering the kind of relief that helped buoy the market last autumn.

If last week's jobs report ends up mattering for housing at all, it will most likely be indirect, filtering through Fed policy and mortgage rates rather than through wages or hiring trends directly. And even that channel may be relatively muted this time around, since both the Fed and bond markets are focused overwhelmingly on inflation, the fiscal outlook, and geopolitical developments rather than any single employment report.

What inflation data shows this week, and over the course of this fall more broadly, will do far more to determine where mortgage rates settle heading into early next year, right as buyers and sellers start making real decisions again.

Realtor, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Neutral

Mortgage rates are moving sideways today. The MBS market worsened by -30 bps last week. This may have been enough to increase mortgage rates or fees. The market experienced high volatility yesterday.

This Week's Rate Forecast: Neutral

These are the three things that have the greatest ability to impact rates week. 1) Geopolitical, 2) Inflation and 3) Central Banks.

1) Geopolitical: We come back from a long-holiday weekend with plenty to absorb. Canada versus US Trade War has moved another notch higher, Iran and Oman say they have an agreement to control the Straight of Hormuz, Iran has attacked Saudi energy sites and the IDF has hit Hezbollah sites. As a result, oil prices across the board are being pressured higher.

2) Inflation: We will get both PPI and CPI this week with the main focus on Friday's CPI report. A higher than expected report will pressure markets.

3) Central Banks: The European Central Bank is expected to be the first of the major banks to raise interest rates in order to address inflation pressed higher by oil.

Treasury Auction: This week's 30 year Treasury Bond auction will be the most important:

09/08 3 year note.

09/09 10 year note.

09/10 30 year bond.

This Week's Potential Volatility: High

This morning markets are seeing steady trading despite the escalation over the weekend. Volatility at moderate to low levels but as always is likely to spike higher later in the week.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.