For most of the year, we’ve talked about The Fed’s policy of higher for longer, how the BLS jobs data is inaccurate and not reflecting the true state of the jobs market. This month might be a month we look back on as a turning point for interest rates and housing as we saw mortgage rates improve, and for the first time in the past 2 years, the BLS Jobs report reflected data that we feel more accurately depicts the true state of the jobs market.

If you read our newsletters, we’ve talked about how the BLS has shown strong jobs only to revise those reports later for the worse or how their birth/death model skews the actual jobs report. This trend has also come under fire from economists, Wall Street and even the Fed who has acknowledged that they need to take all data points into account.

This month, the BLS reported that there were only 73,000 jobs created in July, which missed estimates of 110,000. On top of that, the BLS revised their prior two reports by a combined 258,000! May was a prime example of how incredibly inaccurate the BLS has been since their initial report showed that in May there were 139,000 jobs created, but in this month’s release, May was revised down by 125,000 jobs, which means that in May there were only 19,000 jobs created.

The average revision is over 77,000 per month, which is twice as bad as last year’s average revision. While Fed Chair Powell continues to cite BLS data, he chose not to cut rates in the July meeting, but this data hasn’t gone unnoticed. Fed Governors Waller and Bowman spoke about their reasons for dissenting at the July 30th meeting, where both wanted a 25 basis point cut.

Waller is the likely successor to Powell, and to this point, Waller appears to be a very rate-friendly President should he get the appointment in June of 26. Both had a similar explanation saying that the Fed should look past one-time increases like tariffs, that the economy is not as strong, averaging 1.2% growth over the first 2 quarters and that the labor market is weaker than the BLS states.

Bowman introduced a new metric she is tracking, which is Core PCE inflation, minus the impact of tariffs. Bowman believes that figure is 2.5% which means that the tariffs are accounting for roughly 0.2% to 0.3% inflation thus far. 2.5% is pretty close to their goal, so as the transitory effects of inflation go away, true inflation should be closer to the Fed target of 2.0%.

With the large revisions to May’s BLS data, if the BLS had simply reported accurately from the beginning, the Fed would have definitely cut in July, so both Bowman and Waller felt this was an appropriate time to start cutting.

It remains to be seen if Fed Chair Powell will start listening to the alternatives provided by Bowman and Waller or if he’ll continue with his hard-line “higher for longer” mentality that has so far been the story of the year economically.

That being said, mortgage rates follow the 10 Year Treasury and with everything we just discussed, we saw the 10 year treasury note drop to start August. While any drop is a welcome sign, it’s still not as significant of a drop as we’d like to see, and until the 10 Year Treasury gets under 4% for a sustained period of time mortgage rates should trade in a very similar range.

Yes, mortgage rates are better to start August than they were to start July, but until the Fed starts cutting, we don’t see much opportunity for any sort of large improvements to mortgage rates.

While we don’t want to end our newsletter on a down note, this is all positive since the course appears to be set, the trend is positive and we feel strong about mortgage markets for the remainder of the year.

If you, your friends or family ever have questions, need mortgage advice, or just want to catch up, always feel free to reach out and we’d love to have a private consultation.