Jobs, The Fed, and Your Mortgage

Interest rates are falling and job numbers just got a major correction. If you’re a homeowner, investor, or just trying to make sense of the economy, now’s the time to pay attention.

The Federal Reserve met yesterday and lowered interest rates by 0.25%. The Reserve has noted for some time that they would be lowering rates, so the decrease comes as no surprise. We’ll explore what this means for you and your finances later in the article.

The real surprise, however, was the September jobs revision. A huge revision which reduced the number of jobs the economy added by 911,000 – the largest amendment in over 25 years!

There are many job-related statistics reported, so let’s break down what is released and when. Most of the data comes from the Bureau of Labor Statistics, though some figures are sourced from private companies, such as ADP.

Weekly Initial and Continued Claims:

Released: Every Thursday for the prior week. This data does not measure job creation; instead, it reflects state-reported claims for unemployment benefits.

ADP Research:

Released: The first Wednesday of the following month. This is a private employment report released by ADP and based on payroll data.

Monthly Job Report

Released: The first Friday of the following month. This data is collected by survey. As you can imagine, it’s often inaccurate.

First Revision

Released: Second month following the month, data collected by additional survey responses.

Second Revision:

Release: Third month following the month. Data collected by additional survey responses.

Preliminary Benchmark Revision:

Released: September for the prior 12-month period ending in March. This is more comprehensive data from the Quarterly Census of Employment and Wages.

Final Benchmark Revision:

Released: February of the following year, nearly 12 months after the reporting period. This is the finalized and most authoritative version for the history books.

Trends

So, what has the trend been? We have been seeing a significantly weakening labor market. Revisions for June and July were large, and the August job numbers were poor. Added to that was the massive 911,000 decrease in the September annual benchmarking report which covers March 2024 through March of 2025. We also saw a small increase in monthly unemployment report.

There are a number of explanations for these poor numbers. First, in the monthly report, it coincides with a sharp decrease in the stock market and uncertainty around the effect of tariffs. Perhaps companies simply postponed hiring until tariff negotiations worked their way through the system. If that is the case, we should see an increase in job creation in the coming months. Additionally, we may be seeing the beginning impact of immigration policy or artificial intelligence in the labor force. While there is no clear answer, it can’t be ruled out that we are simply seeing a slowing economy.

The large annual revision we saw doesn’t change the overall employment rate, but it does indicate that the economy might not be as strong as we thought and that we may have larger numbers of people leaving the labor market. The next few months of unemployment and jobs numbers are going to be very important to determine if the trend we are seeing continues.

Back to the Federal Reserve.

What does this have to do with the Federal Reserve? Their “dual mandate” is to ensure maximum employment and stable inflation.

With the employment number faltering and relatively stable inflation, they lowered interest rates to encourage economic investment.

The “interest rate” they are lowering is the overnight Fed Funds rate. Banks are required to keep a certain amount of capital at all times. If they loan out money, but don’t have enough capital, banks can loan each other money overnight to meet capital requirements. In order to make money, the interest they charge on loans like mortgages must be greater than the interest they pay on overnight loans between banks. When the Fed Funds rate is lowered, banks can lower the rates they make on other loans.

The immediate impact of lower rates is less interest earned on short-term investments like money markets, CD’s or US Treasury Bills. Mortgage rates have gone down but are slightly more market-driven than other lending products. We saw mortgage rates really start to fall a few weeks ago when it was clear the Federal Reserve would be cutting rates in September. Corporate loans or expansion and hiring also tends to pick up.

Longer term bonds are driven by supply and demand and not the Fed Funds rate. That said, when investors can’t earn as much in money markets and CDs, they often turn to longer term corporate or government bonds to earn more interest. That increases demand and decreases interest rates new bonds have to offer. So, while not directly tied to interest rate policy, it will likely filter through, and we will see the interest rate on longer term bonds go down.

What to do now?

First: We do expect the Fed to continue to lower rates. Mortgage rates are currently between 5.25% and 5.75%. It might make sense to refinance a higher rate mortgage if you can do so with limited to no closing costs. Otherwise, there will likely be further opportunities to refinance in the near future and patience may be rewarded.

Second: Reassess cash positions. We expect money market rates to drop to about 3.75-4%. Better options may exist for short-term (“safe”) cash.

Third: Pay close attention to the employment rate and leading market indicators. The market is quite high and if we are on the brink of an economic slowdown, portfolio rebalancing or adjustments may be in order.

In a rapidly shifting economic environment where interest rates, job data, and market signals can change direction quickly, it’s crucial to have someone watching the landscape closely. Whether it’s deciding when to refinance, repositioning your portfolio, or managing cash effectively, these decisions are too important to make in isolation. Consulting a financial professional ensures you’re not just reacting, but responding strategically with a plan tailored to your goals.

As always, if you would like to discuss your current situation or review your portfolio, we’re always here to help and we’re just email or phone call away.

The information given herein is taken from sources that IFP Advisors, LLC, dba Independent Financial Partners (IFP), IFP Securities LLC, dba Independent Financial Partners (IFP), and its advisors believe to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as IFP does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. This report may not be reproduced, distributed, or published by any person for any purpose without IFP’s express prior written consent.