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Market Analysis 9.5.25: BLS Jobs Report

Good Friday morning from your Hometown Lender,

The biggest report of the month is the BLS jobs report.

It was released today and almost always creates increased volatility. Today was no different and didn’t disappoint. It’s a fairly straightforward report coming in much weaker than expected. There was an expectation of 75,000 jobs created, but the numbers only came in at 22.000 with a revision lower of another -16,000 from last month’s already bad numbers.

Unemployment ticked up to 4.3%.

The only real caveat is that the unemployment rate suggests a more gentle softening of labor market conditions–a fact that likely accounts for 10-yr yields “only” being 6-7bps lower in the first half hour of post-report trading. The other way to account for it is to say that bonds had already rallied from 4.3 to 4.16 in the 3 days leading up to this morning. That overall move is about the same size as the 8/1 post-report rally. Either way, bad news for the labor market is good news for rates.

The cautionary tale here is that while odds for a 50bps Fed cut surge, this is deja vu from last year when the Fed cut and rates worsened. I am not saying that will happen again in a week and a half; I am only saying the best time to lock will be before the Fed meeting, as the cuts are already priced into the market.

Mortgage Market & Rate Update –Week Ending September 5, 2025

📊 This Week in Review

This week’s economic calendar was packed with labor market data, and the story was consistent: the job market is cooling. That’s important because the Federal Reserve has been watching employment closely to decide when to cut interest rates.

Key highlights:

  • Non-Farm Payrolls (NFP) for August came in at +22,000 jobs, far below expectations of +75,000.
  • Unemployment Rate ticked up to 4.3%, the highest since 2021.
  • Average Hourly Earnings rose 0.3% month-over-month and 3.7% year-over-year, showing wage growth is steady but slowing from earlier in the year.
  • Earlier in the week, JOLTS job openings fell, ADP private payrolls missed expectations, and weekly jobless claims edged higher.

In short: The labor market is losing momentum, which historically leads to lower interest rates as the Fed shifts focus from fighting inflation to supporting growth.

💹 Mortgage-Backed Securities (MBS) & Rates

Mortgage rates are heavily influenced by the bond market, especially MBS prices. This week:

  • UMBS 30-Year 6.0% coupon rose to 102.56, up +28 basis points today.
  • The 10-Year Treasury yield fell from 4.30% last Tuesday to 4.08% this morning, a significant drop that supports lower mortgage rates.
  • Many lenders are now quoting top-tier 30-year fixed rates around 6.50%, the best levels in weeks.

Why this matters: When bond yields fall, mortgage rates often follow. The market is now pricing in a high probability of a Fed rate cut in two weeks, with some analysts even suggesting a 0.50% cut instead of the usual 0.25%.

🏛 Political & Policy Developments

  • Federal Reserve: Several Fed officials have signaled they’re open to faster rate cuts if the labor market weakens further.
  • White House & Congress: Recent political headlines include debates over fiscal stimulus measures aimed at supporting job growth. While no major legislation has passed yet, markets tend to react positively to signs of economic support.
  • Global Trade: The U.S. trade deficit widened more than expected, partly due to companies front-loading imports ahead of potential tariff changes. This can influence inflation and, indirectly, rate expectations.

🔮 Looking Ahead – Rate & Market Expectations

Think of mortgage rates like a seesaw with the economy. When the economy slows, rates often go down; when it heats up, rates tend to rise.

Short-term outlook (next 2–4 weeks):

  • Rates have room to improve if upcoming inflation data (CPI, PPI) shows continued cooling.
  • If the Fed cuts rates by 0.50% later this month, we could see another leg down in mortgage rates.

Medium-term outlook (3–6 months):

  • If the labor market continues to soften and inflation stays contained, rates could trend toward the very low-6% range for well-qualified borrowers.
  • Political developments—especially fiscal policy or unexpected global events—could cause volatility.

💡 Takeaway for Borrowers

  • If you’re house hunting: The recent drop in rates improves affordability. Locking now secures today’s gains
  • If you’re refinancing: The time to act is likely now as uncertainty around the Fed could cause a knee jerk reaction to the recent rate improvements.
  • If you’re on the fence: Have your documents ready so you can act quickly if rates dip.

Posted by Noble Home Loans | Equal Housing Lender | NMLS #328275 |
For informational purposes only. Not a commitment to lend. Rates subject to change.

Stay safe, enjoy the weekend, but first, make today great!