If today’s employment report were a weather forecast, it would read: “Clouds gathering, pack an umbrella.” With only 22,000 jobs added in August and earlier months revised sharply lower (May down to 19,000; June now –13,000, the first negative print since December 2020), the labor market is losing steam. The three-month average has slipped below 30,000 jobs per month, a level we usually see on the doorstep of recession risk. The unemployment rate ticked up to 4.3%, the highest since October 2021, though part of that rise was rounding noise, and August payrolls often get revised up later.
Put it together and you get a clear market takeaway: the Fed is overwhelmingly likely to cut 25 bps on September 17. That expectation is already pulling mortgage rates down to their lowest territory in almost a year. Because markets have priced in a quarter-point move, don’t expect a big additional drop after the meeting unless the Fed signals more easing than investors already assume.
Is the Labor Market in Recession? Not Yet, But It’s Flirting With It
The forward indicators aren’t flashing red, but they’re definitely not green. Job openings are cooling, companies are slowing hiring, and yet layoffs aren’t spiking, and unemployment insurance claims remain low. That combination says “late-cycle stall,” not freefall. The risk becomes more concrete if we rack up more negative payroll prints in coming months or if joblessness climbs toward 4.5% and beyond.
Could the Fed go 50 bps instead of 25? A hawkish minority on the Committee argued for a cut earlier this year and may push for a larger move now. But with unemployment only at 4.3% and August data historically noisy, the majority is likely to stick the landing with 25 bps, especially after last September’s bigger cut proved (in hindsight) heavier than needed when markets were split between 25 and 50.
What This Means for Mortgage Rates Right Now
Rates are falling today, not two weeks from now. The average 30-year fixed has slid into the mid-6.5s (roughly 6.55%–6.58%), down from north of 7% earlier this year. That move materially lowers monthly payments and lifts purchasing power; think roughly $20,000 more house on the same budget (about $458,750 vs. $439,000) in a representative example. If we see prints in the 6.3% neighborhood and they stick, it would be the first durable chance to lock that level since mortgage rates first popped above 6.3% in fall 2022. Prior dips below that line were brief.
Reality check: because the expected 25-bp cut is already baked in, a dramatic post-meeting rate plunge is unlikely unless the Fed telegraphs additional cuts.
The Ownership vs. Renting Shift No One’s Talking About
Beneath the rate headlines, household formation is changing shape. In the second quarter:
Homeowner households edged down 0.1% year over year to about 86.2 million, the first annual decline since 2016.
Renter households rose 2.6% to roughly 46.4 million, one of the largest annual increases in recent years.
That flip is consistent with the affordability squeeze: home prices remain high (the July median was $443,867, up 1.4% year over year and the highest July on record), and mortgage rates, even after easing, hover near 6.56%, more than double the pandemic low. Add macro uncertainty and later family formation, and many households are choosing to rent longer, forfeiting near-term equity building in exchange for flexibility.
Notably, the homeownership rate is holding around 65% (down slightly from 65.6% a year earlier), while the rentership rate is 35% (up from 34.4%). In other words, ownership isn’t collapsing, but it isn’t expanding either.
So… What Should You Do?
Buyers:
If you were waiting for the market to blink, it just did. Re-engage your pre-approval, talk with your lender about float vs. lock strategy into the Fed meeting, and use the current backdrop; cooler price growth, more listings, and better negotiability, to structure offers with credits or seller-paid buydowns. If rates drift into the low-6s and hold, consider locking; those windows don’t stay open forever.
Refinancers:
Run the numbers now. If you can drop your rate meaningfully and recover costs within a reasonable horizon, get in the queue. Waiting for a post-meeting windfall is a bet that the Fed will out-dove market expectations. Possible, not probable.
Sellers:
Lower rates revive some demand, but buyers remain selective. Price to today’s comps, not yesterday’s headlines, and consider targeted incentives (closing credits, buydowns) to widen your buyer pool. If you planned a fall listing, moving sooner rather than later can help you capture momentum before data or Fed guidance shifts the tone.
The Bottom Line
Today’s jobs report cements the case for a September 17 quarter-point cut and has already nudged mortgage rates toward one-year lows. The labor market looks fragile; weak hiring, steady layoffs, so the Fed will likely move, but not sprint. Markets have priced that in, which means the biggest rate relief is happening before the meeting, not after.
If you can act within your budget now, this is a sensible moment to do it before the next data release, the next revision, or the next shift in Fed messaging changes the calculus. As always, the smart play is the same one that wins every cycle: get clear on your numbers, move when they work, and don’t confuse headlines with a plan.