Mortgage rates moved slightly lower, with the average 30-year fixed-rate mortgage dropping nine basis points to 6.59%. A basis point equals one one-hundredth of a percentage point. July's jobs report showed slower job growth while unemployment remained fairly stable, indicating fewer added positions without a rise in labor participation. Federal Reserve Chair Jerome Powell warned that this unusual situation raises downside risks to employment and said that restrictive policy and shifting risks may warrant adjusting the policy stance. Markets interpreted that cautious language as a strong signal that the Fed could cut rates in coming meetings.
Powell's speech touched on several important topics, but if you were looking for hints of a possible rate cut, one section stood out. The July jobs report, which came out at the beginning of this month, sparked concern because job growth slowed way down. But Powell focused on the report's unemployment numbers, which remained fairly stable. There are fewer jobs being added, but we aren't seeing a jump in the number of people looking for work.
"This unusual situation suggests that downside risks to employment are rising," Powell said. Powell wrapped up that rundown by noting that "with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance." This might sound about as neutral as it gets, but for Fed watchers this was downright juicy. When the labor market slows too much, the Federal Reserve tends to lower interest rates - the idea is that bringing down the cost of borrowing will encourage hiring.
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