Better-than-expected unemployment data adds uncertainty to mortgage rate outlook ahead of Fed meeting
Initial jobless claims dropped to 216,000 in the week ended November 22, beating economist forecasts of 225,000 and signaling a labor market that remains more resilient than many anticipated.
The data, released Wednesday ahead of the Thanksgiving holiday, now complicates the Federal Reserve's calculus for its December policy meeting as policymakers weigh whether economic conditions warrant another interest rate cut.
The stronger-than-expected claims figure sent Treasury yields higher, a signal that markets are pricing in less dovish action from the Fed.
However, FedWatch data showed an 82.9% probability of a rate cut at the December meeting as of Wednesday morning, suggesting investors remain largely confident in another reduction despite the robust jobs data.
Federal Reserve governor Christopher Waller said Monday he would advocate for an interest rate cut at the December Federal Open Market Committee (FOMC) meeting, prioritizing labor market weakness over persistent inflation concerns.https://t.co/ArwYpjEkpe
— Mortgage Professional America Magazine (@MPAMagazineUS) November 24, 2025
A labor market caught in stasis
The jobless claims improvement masks deeper labor market dysfunction.
Continuing claims, a proxy for people receiving benefits, rose 7,000 to 1.96 million during the week ending November 15, pointing to persistent difficulty for jobless workers seeking new positions.
That metric has trended upward since September and remains near pandemic-era recovery levels.
Economists attributed the stalled hiring to what they called a "no hire, no fire" environment, where President Donald Trump's trade and immigration policies have made businesses reluctant to expand headcount while also holding back on layoffs. Yet layoff announcements from Amazon and Verizon suggest that calculus may be shifting, though actual filings have not yet accelerated dramatically.
Consumer sentiment deteriorated alongside these mixed signals. The Conference Board's Consumer Confidence Index dropped to 88.7 in November, its lowest level since April, with job-related anxieties intensifying. The share of workers describing jobs as "plentiful" plummeted to 6% from 28.6% in October.
The rate cut probability holds firm
Despite Treasury rates climbing since Wednesday's release, the Fed's path forward remained uncertain. The agency has cut rates twice this year in an effort to support labor market conditions, but officials signaled growing caution about future reductions.
With inflation still elevated, policymakers face pressure to pause or halt cuts despite continued labor market weakness.
For the mortgage industry, the gap between stronger-than-expected jobs data and persistent market expectations for a December cut means borrowers should brace for continued rate pressure through year-end.
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