Weak Job Growth Pushes Mortgage Rates to 2025 Lows

Overview: The closely watched employment data released on Friday fell far short of expectations, increasing concerns about the strength of the labor market. As a result, mortgage rates ended the week near the lowest levels of the year.

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The highly anticipated monthly Total Nonfarm Payrolls labor market report revealed that the economy only added 22,000 jobs in August, below the consensus forecast of 75,000. Average job gains over the last three months were less than 30,000, a far cry from increases mostly ranging from 100,000 to 300,000 during 2023 and 2024. Looking at the other major components of the report, the unemployment rate rose from 4.2% to 4.3%, the highest level since 2021. Average hourly earnings, an indicator of wage growth, were 3.7% higher than a year ago. This is down from an annual rate of increase of 3.9% last month, and the lowest level since 2021. In addition to the August data, the Bureau of Labor Statistics released this week the annual revisions to the results for the year prior to March 2025, which showed a massive drop of 911,000 jobs from the initial estimate over that period.

In contrast to the labor market data, another significant economic report released this week by the Institute for Supply Management (ISM) exceeded expectations. The ISM Services Index increased to 52, above the consensus forecast of 51. Readings above 50 indicate an expansion in the sector. Since services account for over three-quarters of U.S. economic activity, this is a positive sign for future economic growth.

The latest inflation data was surprisingly lower than expected. After a shockingly large jump of 0.9% last month, the August core Producer Price Index (PPI) fell 0.1% from July, far below the consensus forecast of a 0.3% increase. Core PPI was 2.8% higher than a year ago, down from an annual rate of 3.7% last month. Economists speculate that higher tariffs are causing some monthly distortions to this data, and they recommend looking at longer time frames to get a better sense of the underlying inflation trend.

The recent decline in rates boosted mortgage applications this week, according to the Mortgage Bankers Association (MBA). Refinance applications increased 12% from last week and were 34% higher than one year ago. Purchase applications rose 7% from the prior week and were up 23% from last year at this time. This was the highest level of applications since July.

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Job Gains (thousands)

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Week Ahead

Sept. 11

Consumer Price Index (CPI)

Sept. 16

Retail Sales report

Sept. 17

Federal Reserve meeting (anticipated rate cut of 25 to 50 basis points)

New Residential Construction report (also known as Housing Starts)