9/8/25 REcap: Labor Market Pain Brings More Mortgage Rate Relief

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A Grim Labor Market

Job Openings Collapse
July job openings fell to 7.18 million, one of the lowest levels since the pandemic. Economists called it a “turning point” — companies aren’t hiring, workers aren’t quitting, and the market feels frozen. It’s now harder to land a job than at any point in the past four years. And, job openings data is always a month behind and many believe the August data that we see in October will look EVEN uglier.

ADP Employment
Private-sector payrolls added just 54,000 jobs in August — with construction and leisure carrying the weight while manufacturing contracted. Pay growth cooled too, with job-stayers seeing 4.4% raises and job-changers 7.1%. Nela Richardson, ADP's chief economist, blamed consumer caution and AI disruptions for the slowdown. She also said, “the year started with strong job growth, but that momentum has been whipsawed by uncertainty.”

The Jobs Report
Friday’s official jobs report didn’t just flash weakness — it confirmed a trend that has been building all summer. Unemployment jumped to 4.3%, a four-year high, while previous months were revised down so heavily that the U.S. has seen virtually no net job growth for three straight months. As I wrote yesterday, this isn’t a one-off blip but the culmination of months of deterioration across industries. What job seekers have felt for months (if not years)— stalled openings, tougher interviews, fewer offers — is now showing clearly in the data. Markets see it too, and that’s why they’re pressuring the Fed to respond with meaningful cuts.

AI Dinner at the White House

AI continues be center stage and that was highlighted again last week when Trump hosted a showcase dinner for tech billionaires at the White House. Mark Zuckerberg pledged $600 billion in AI data centers and infrastructure by 2028, and what was thought to be a hot mic incident was actually a misunderstanding because Meta could spend as much as $1 trillion by 2030.

The impact won’t be limited to Silicon Valley. Communities that host these data centers are likely to see housing shortages and higher local costs as they soak up power, land, and water. Bigger picture — all this AI spending raises an uncomfortable question: if machines are replacing more jobs than they create, what does the future of work look like?

A New Sheriff is Coming to Town

Trump has made it clear on dozens of occasions that Powell’s days are numbered. On Friday, he named Kevin Hassett, Kevin Warsh, and current Fed Governor Christopher Waller as the three finalists to replace Powell as Fed Chair. Waller has openly favored multiple cuts in coming months, and both Hassett and Warsh are seen as Trump-aligned choices who would move policy quickly in the direction he wants. That means the Fed debate isn’t just about September’s cut — it’s about who will be steering the ship next year, and how aggressively they’ll slash rates once Powell is out.

✂️ Fed Cuts: Big or Small?

With jobs collapsing, a September rate cut is locked in with 100% certainty. The only debate is whether it’s 0.25% (88% chance) or 0.50% (12% chance).

My preference? .25%. We saw last September that when the Fed went big, mortgage rates actually bounced higher. More inflation news reports this week. If inflation is better than expected the Fed might opt for a 0.5% cut.

Right now, rates have momentum on their side. A steady pace of quarter-point cuts could keep mortgage rates trending down without spooking markets. A jumbo cut risks breaking that rhythm.