Will Friday’s Surprise Job Report Move Interest Rates Down?

Last Friday, we got a surprise that will most likely cause the Fed to lower rates next month. A dramatic decline in the labor market growth was not what economists and investors expected. Here is what we know:

• The July payroll report showed US employers added just 73,000 jobs in July, lower than economists expected.
•  The number of jobs added in May and June was revised sharply lower, showing that the labor market is far weaker than most believed.
•  This puts pressure on the Federal Reserve to cut interest rates at the meeting in September.

 The Federal Reserve’s mandate is to balance the labor market and inflation. For the past few years, the Fed has been able to focus on bringing down inflation because the labor market was strong. The July numbers, along with the revisions, suggest that the risks to the employment side of the mandate may be coming into balance with those of inflation. We will be carefully watching to see how this news will impact mortgage rates. Please contact me with any questions.