Latest Jobs Data Makes March Rate Cut Slightly Less Likely

By Published On: January 6th, 20241.8 min read
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A look below the surface reveals a less-hot picture of the late-2023 labor market than the hot December jobs headline suggests. The latest jobs report is unlikely to impact mortgage rates much. 

On the surface, the December jobs report appears to be a hot dataset that should cause interest rates to increase and make the Fed less likely to cut in at their March meeting than financial markets expected. However, the details under the hood paint a muddy picture. 

More jobs were created in December and wages increased faster than expected. Additionally, the unemployment rate didn’t increase as expected, but that was largely because fewer people were searching for jobs, not because of greater job creation. This all points to a robust labor market. 

However, October and November payroll employment numbers were both revised down. There were a combined 71,000 fewer jobs in those months than we previously thought, making them look substantially weaker. Combine that with this week’s news of weaker-than-expected job openings data in November, and the labor market looks a bit more fragile.

Rates shot up on this morning’s release, but have subsequently retraced much, if not all, of the initial reaction as people digested the details. Short-term and long-term rates have been bouncing around as investors try to understand this complicated report.

This morning’s report slightly decreases the odds of the Fed cutting interest rates in March–that’s the key date markets are focused on right now. But there is much data to come before that. We’re looking ahead to Thursday’s inflation report for December, as well as a couple more employment and inflation reports. Not to mention the Fed meeting at the end of January, where they are still relatively certain to hold steady.

For homebuyers, this jobs report is unlikely to move mortgage rates much. The weekly average mortgage rate was flat this week from last week, and it’ll probably hold steady at just above 6.6% next week, too. Longer term, mortgage rates should decline more if and when a March rate cut from the Fed becomes more certain–and this report makes that possibility only slightly less likely.

 

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