Weak Jobs Report May Give Fed Pause on Interest Rates

Mortgage rates have been hovering near 7% in recent weeks, but the latest jobs report may give monetary policymakers pause before raising interest rates further. According to HousingWire's Mortgage Rates Center, 30-year conforming loan rates averaged 6.91%, down 1 basis point from last week.

However, the July jobs report showed a decline of 23,000 nonfarm payrolls, which could keep the Federal Reserve from raising rates. Selma Hepp, chief economist at Cotality, said that slower job growth can dampen consumer confidence and make households more cautious about major financial decisions, including home purchases.

Hepp also noted that this could lead to a higher likelihood of rate cuts or resistance to future rate hikes. Joel Kan, vice president and deputy chief economist for the Mortgage Bankers Association, agreed that while inflationary pressures are expected to persist, the weakness in the labor data may provide 'breathing room' for the Federal Reserve.

Kan also predicted that interest rates will be raised in early 2027, but any additional upside surprises to inflation could bring this timetable forward. Sam Williamson, senior economist at First American, stated that while some of the July weakness was due to government education payrolls, the labor market has lost momentum and this may offset rising upside risks to inflation.