Hey everybody, I hope you’re doing well. I’m a bit of a nerdy economist, so I’m going to share something I find interesting. I’ll apologize in advance if you don’t agree, but let’s dive in.
Last Friday, August 1st, the jobs report came out and it was dismal. For comparison, I went back exactly one year to the July 2024 report. In August 2024, the Department of Labor reported 114,000 new workers, far below the 176,000 expected. May and June numbers were revised down by about 29,000 jobs. The takeaway back then was that bad economic news could be good for bonds and home borrowing costs, with the Fed likely to start cutting rates in September. That suggested brighter days ahead for the housing market.
Fast-forward to last Friday’s report: The Labor Department showed only 76,000 new jobs versus the 106,000 expected. The bigger shock was the revisions May was revised down to only 19,000 jobs, a drop of 120,000 from the original figure. June was revised to 14,000 jobs, down 133,000. Altogether, May, June, and July showed 258,000 fewer jobs than originally reported.
That means in total, over those three months, only 109,000 jobs were created. To put that in perspective, last year in just July alone we had 114,000 jobs. This year’s three-month total is 5,000 fewer jobs than that single month last year. For a country of 335 million people, that’s abysmal.
This poor performance increases the likelihood that the Fed will lower rates, which could push long-term mortgage rates down. Interestingly, though, we were saying the same thing last year and rates didn’t budge. In fact, according to the market survey from July 31st, the average 30-year rate was 6.72%, exactly the same as a year ago.
So when people ask, “What are rates going to do? Are they going to go down?” I honestly don’t know. The data suggests they could drop, especially with such a weak jobs report, but history shows they may not move much.
If rates do come down, it could create an opportunity to refinance especially if you bought in the last two years and are closer to 7%. There might be some room to maneuver.
Thanks for watching. If you have questions about this or anything else, please reach out. Hopefully we’ll see a few green shoots in the market soon. Take care.
