A weak August jobs report has economists predicting a Fed rate cut—possibly as soon as next week.
The Federal Reserve is facing pressure to cut rates in September after August’s jobs report showed the US labor market slowing. Economists and mortgage industry leaders have been quick to weigh in on the implications for rates, housing affordability, and the broader economy.
“As football season kicks off, August’s jobs report may be the turnover that forces the Fed to change its play calling—starting with its potential 25-basis-point rate cut at its September meeting,” said Sam Williamson, senior economist at First American.
“The underwhelming jobs report reinforces the picture of a labor market that’s losing momentum without collapsing. The three-month average now stands at 29,000, a clear slowdown from earlier in the year.”
Jobs data underwhelms, market braces for change
Employers added just 22,000 jobs last month, well below the 75,000 economists had forecast. The unemployment rate rose to 4.3%—the highest since October 2021—while labor force participation ticked up to 62.3%.
Revisions to prior months added to the softness, with June’s figure revised down to a loss of 13,000 jobs and July revised up to 79,000, resulting in a net two-month revision of -21,000.
“The job market is softening, with even sectors like health care, which had steadily contributed to job growth, now slowing. Job losses continued in the federal government and manufacturing sectors,” said Mike Fratantoni, SVP and chief economist at the Mortgage Bankers Association (MBA).
Wage growth held steady at 3.7% over the past year, but Fratantoni flagged a more troubling trend: “What was more notable was the larger increase in the U-6 to 8.1%, with more workers only able to find part-time work or becoming discouraged by the lack of job openings, and the continued increase in the length of unemployment spells.”
Mortgage market impact and industry reaction
For mortgage professionals, the prospect of a rate cut is both a relief and a challenge.
“With inflation not reaccelerating and job growth fading, the Fed may see this as an opportunity to recalibrate—shifting policy back toward neutral, rather than launching a full pivot to stimulus,” Williamson said.
“A rate cut in September would mark the first step in that adjustment, and could put downward pressure on long-term yields, offering some relief to prospective home buyers facing elevated mortgage rates and prices. For those still on the sidelines, this could be the opening drive that begins to move the chains on affordability—especially if inventory improves and price growth continues to moderate.”
