Author: Eric BernsteinPublished:
Interest rates were having a great week after some signs that the labor market is slowing until one surprise report from Friday has some economists concerned that the labor market isn't cooling at all forcing interest rates to come right back up to 7% again!
However, the average rate on a 30-year fixed rate conventional loan did fall slightly to 6.95% (down from 7.02% last week). Make sure you're signed up for our weekly Friday rate texts. It could make a HUGE difference in your homebuying decision.
However, the average rate on a 30-year fixed rate conventional loan did fall slightly to 6.95% (down from 7.02% last week). Make sure you're signed up for our weekly Friday rate texts. It could make a HUGE difference in your homebuying decision.
This week is CRITICAL for homebuyers. Here's why.
3 out of 4 Signs Show The Labor Market Is Slowing
Almost anyone looking for a job right now will tell you that it's a tough job market out there! People I know personally have spent months searching for a job in their field only to take a position outside of their area of expertise just to make a living. But for some reason, real life and data reporting haven't been lining up, until last week! If you want to understand the pain that many job applicants feel, check out this funny (but depressing) TikTok.
Finally, as we've all suspected, the labor market isn't as hot as it started off earlier this year.
The week kicked off with job openings coming in wayyyy lower than expected (8.1M actual vs 8.4M expected). That's the lowest level of job openings reported since February 2021! The huge drop in openings was unexpected and exactly what we need for the Fed to definitively circle September as the first date for rate cuts.
Private job creation slowed more than expected in May as well as companies added 152,000 jobs on the month (much less than the expected 175,000 estimate). Also good news for homebuyers (but not employees) - payroll grew at just 5% for the 3rd month in a row. “Job gains and pay growth are slowing going into the second half of the year,” ADP’s chief economist, Nela Richardson, said. “The labor market is solid, but we’re monitoring notable pockets of weakness tied to both producers and consumers.”
Lastly, the unemployment rate ticked up to 4.0% (above the expected 3.9%). This was more great news for interest rates as everyone knows we need to see the unemployment rate start to trend towards 5% before the Fed makes meaningful movement on rate. Employment and inflation are tied together and unfortunately, less people employed means less demand for goods and keeps pricing in check.
Now - the bad news that had rates rising on Friday - the surprise job report released by the US Labor Department showed that 272,000 jobs were created in May! Up from 165,000 the month before and well above the 190,000 estimate! The news reversed what was looking like an amazing week for interest rates. Where did these surprise jobs come from? Well, the gains were concentrated in just 3 sectors - health care (68,000), government (43,000), and leisure (42,000). “One step forward, two steps back. Today’s data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut,” said Seema Shah, chief global strategist at Principal Asset Management.
Not that anyone was realistically hoping for a July rate cut, but the data on job growth was a tough way to end an overall positive week for those looking for lower interest rates in the short term! I expect a hangover effect to cause rates to rise slightly on Monday as investors continue to digest the Jobs Report with no new news coming out on Monday to stop the bleeding.
GET READY FOR A SHOWDOWN THIS WEDNESDAY!
Inflation vs the Fed! First Round at 8:30 AM ET then the Second Round at 2 PM ET.
With labor reporting mixed, the stage is set for inflation news and the Fed meeting to have a MASSIVE effect on where interest rates head next. The last 2 months have been good news for inflation coming down and we need that trend to continue. If CPI comes in lower than expected, I expect the Fed to more confidently select September as the time for the first rate cut and interest rates to fall on the news. However, if CPI comes in higher than expected, we may be looking at interest rates heading back to the highs we saw last year.
Whatever happens this week will have a BIG impact on what happens the rest of the year. As of now, analysts are 50/50 on whether a rate cut will take place on September 18th. Hopefully, the news this week points the needle in favor of the homebuyer!
3 out of 4 Signs Show The Labor Market Is Slowing
Almost anyone looking for a job right now will tell you that it's a tough job market out there! People I know personally have spent months searching for a job in their field only to take a position outside of their area of expertise just to make a living. But for some reason, real life and data reporting haven't been lining up, until last week! If you want to understand the pain that many job applicants feel, check out this funny (but depressing) TikTok.
Finally, as we've all suspected, the labor market isn't as hot as it started off earlier this year.
The week kicked off with job openings coming in wayyyy lower than expected (8.1M actual vs 8.4M expected). That's the lowest level of job openings reported since February 2021! The huge drop in openings was unexpected and exactly what we need for the Fed to definitively circle September as the first date for rate cuts.
Private job creation slowed more than expected in May as well as companies added 152,000 jobs on the month (much less than the expected 175,000 estimate). Also good news for homebuyers (but not employees) - payroll grew at just 5% for the 3rd month in a row. “Job gains and pay growth are slowing going into the second half of the year,” ADP’s chief economist, Nela Richardson, said. “The labor market is solid, but we’re monitoring notable pockets of weakness tied to both producers and consumers.”
Lastly, the unemployment rate ticked up to 4.0% (above the expected 3.9%). This was more great news for interest rates as everyone knows we need to see the unemployment rate start to trend towards 5% before the Fed makes meaningful movement on rate. Employment and inflation are tied together and unfortunately, less people employed means less demand for goods and keeps pricing in check.
Now - the bad news that had rates rising on Friday - the surprise job report released by the US Labor Department showed that 272,000 jobs were created in May! Up from 165,000 the month before and well above the 190,000 estimate! The news reversed what was looking like an amazing week for interest rates. Where did these surprise jobs come from? Well, the gains were concentrated in just 3 sectors - health care (68,000), government (43,000), and leisure (42,000). “One step forward, two steps back. Today’s data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut,” said Seema Shah, chief global strategist at Principal Asset Management.
Not that anyone was realistically hoping for a July rate cut, but the data on job growth was a tough way to end an overall positive week for those looking for lower interest rates in the short term! I expect a hangover effect to cause rates to rise slightly on Monday as investors continue to digest the Jobs Report with no new news coming out on Monday to stop the bleeding.
GET READY FOR A SHOWDOWN THIS WEDNESDAY!
Inflation vs the Fed! First Round at 8:30 AM ET then the Second Round at 2 PM ET.
With labor reporting mixed, the stage is set for inflation news and the Fed meeting to have a MASSIVE effect on where interest rates head next. The last 2 months have been good news for inflation coming down and we need that trend to continue. If CPI comes in lower than expected, I expect the Fed to more confidently select September as the time for the first rate cut and interest rates to fall on the news. However, if CPI comes in higher than expected, we may be looking at interest rates heading back to the highs we saw last year.
Whatever happens this week will have a BIG impact on what happens the rest of the year. As of now, analysts are 50/50 on whether a rate cut will take place on September 18th. Hopefully, the news this week points the needle in favor of the homebuyer!
Key reporting dates this week:
Mon, 6/10: None scheduled
Tues, 6/11: NFIB optimism index
Wed, 6/12: Consumer price index, Core CPI, Federal Reserve Meeting, Interest Rate Decision
Thurs, 6/13: Initial jobless claims, Producer price index, Core PPI
Fri, 6/14: Import price index
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About the Author:
Eric Bernstein is the President and Co-Founder of LendFriend Mortgage, where he helps homebuyers make smarter, more confident decisions in today’s fast-moving housing market. With over a decade of experience guiding hundreds of clients—from first-time buyers to seasoned investors—Eric brings a mix of market insight, strategy, and personalized service to every mortgage transaction. Each week, Eric breaks down the housing and economic headlines that matter, giving readers a clear, no-fluff view of what’s happening and how it might impact their buying power.