A slightly cool, but mostly as expected, November jobs report locks in another 25 bps cut at the Federal Reserve’s December 18 meeting, barring an outsized surprise when CPI numbers are released next week. While mortgage rates will remain mostly unchanged following today’s report, the Fed is expected to project as few as just two rate cuts in 2025 and appears poised to pause at their January meeting.
227,000 jobs were created in November, mostly in line with expectations of 215,000 jobs. Much of the job creation is a bounce back following the disruption from two hurricanes and the Boeing strike, which resulted in just 36,000 jobs being created in October. The three-month moving average of job creation in the second half of 2024 has been hovering at a solid pace of around 150,000 jobs per month. It is down from the unsustainably hot pace of around 350,000 jobs per month in the second half of 2022 and 225,000 jobs per month in the second half of 2023.
The unemployment rate unexpectedly rose to 4.2%, edging up from 4.1% previously. The jobs report contains two surveys: the establishment survey that provides the job creation number and the household survey that provides the unemployment rate. The household survey is telling a more pessimistic story this month than the establishment survey. The unemployment rate is still low at 4.2% and has been bouncing around in recent months, but is up from 3.7% a year ago, reflecting a steady slowdown in the labor market. More concerning is that the labor force participation rate continued its decline, dropping slightly to 62.5% from 62.6%.
Mortgage rates are unlikely to change much, as today’s report cements the expected 25 bps cut at the Fed’s December 18 meeting. Next week’s core CPI reading would need to come in very high to derail that rate cut. The Fed today appears to be slightly less dependent on month-to-month data readings and is more focused on the overall narrative from the data. However, when the Fed releases its new set of projections, they are expected to show fewer rate cuts than they did previously, perhaps as few as just two for all of 2025. That would indicate that they are likely to pause at their January meeting, rather than continue the series of cuts they have implemented since September 18. Importantly, mortgage rates are currently being driven as much as—or perhaps more—by government fiscal policy (e.g., government spending, tax cuts, tariffs), than they are by the Fed’s monetary policy.
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