October Jobs Report: 165,000 Jobs and What It Means for Rates

The economy added 165,000 jobs in October, more than three times the average monthly gain of the past year. A strong job market is good news for almost everyone except the borrower waiting on a rate cut. If you have clients on the fence about locking, expect the phone to ring this week.

What happened

The Bureau of Labor Statistics released its October Employment Situation report on Friday, November 6. Let's break it down:

• Payrolls. Nonfarm payrolls (every job on a company or government payroll, minus farm work) rose by 165,000. The average monthly gain over the prior 12 months was 48,000.
• Unemployment. The unemployment rate slipped to 4.1% from 4.2% in September, per BLS. It has stayed between 4.1% and 4.3% since March.
• Wages. Average hourly earnings rose 0.4% for the month, to $38.00. Over the past year they're up 3.1%.
• Revisions. BLS revised August up to 186,000 jobs and September up to 60,000. Together, those two months came in 84,000 jobs higher than first reported.

Professional and business services led the way with 70,000 new jobs, followed by health care (42,000), transportation and warehousing (25,000), and manufacturing (19,000). Construction barely moved.

Think of the jobs report as the economy's monthly report card. October came home with an A-minus, and BLS went back and raised two older grades while it was at it. The labor market isn't tired. It's jogging.

What it means for rates

Why does a good jobs report make rates worse?

Because a hot job market can keep inflation hot. When more people are working and paychecks are growing, they spend more, and prices have an easier time climbing. The Fed doesn't cut rates into that.

Mortgage rates follow the 10-Year Treasury, the yield the government pays to borrow for 10 years. Mortgage-backed securities, bundles of home loans sold to investors like bonds, trade off that yield. When it climbs, rate sheets usually follow.

On jobs day, the 10-year closed at 4.86%, up from 4.84% the day before. That's a small move for a big beat. The 2-year yield, which tracks Fed expectations more closely, did more of the reacting: it rose from 4.46% to 4.51%.

Now for the Fed. At its October 28 meeting, the Federal Open Market Committee (the Fed group that sets rates) held the federal funds rate at 3.75% to 4%. That's the rate banks charge each other overnight. The vote was 10 to 2, and both dissenters, Lisa Cook and Beth Hammack, wanted to raise rates by a quarter point. The statement said it plainly: "Inflation remains elevated."

So two Fed officials wanted a hike before this report came out. A strong jobs number and 0.4% wage growth give them more to point to in December. Does that mean a hike is coming? Not necessarily. Ten members voted to hold, and they'll see a fresh inflation report first. But nothing in this report makes the case for a cut.

On the bright side, rates were already easing before Friday. Freddie Mac's average 30-year fixed rate was 7.18% on November 5, down from 7.24% the week before. Its 15-year average was 6.57%. That survey covers rates from before the jobs report, so the next one will be the first to show its effect.

What to tell your borrowers

1. "The economy added 165,000 jobs in October. That's a strong month, and strong job numbers usually keep rates from falling fast."
2. "Freddie Mac's average 30-year rate was 7.18% on November 5, a bit lower than the week before. Rates eased a little last week."
3. "The Fed meets December 8 and 9. Two officials voted for a rate hike in October, so I wouldn't plan around a cut before the end of the year."
4. "Waiting for a lower rate is a bet. If today's payment works for you, locking takes that bet off the table."
5. "New inflation numbers come out November 10. I'll let you know what they mean for your rate."

To show a borrower what today's rate does to their payment, run it in the free mortgage calculator and text them the link. The link keeps their numbers, so they see what you see. For a renter holding out for a cut, the rent vs. own calculator shows the year buying beats renting at today's rate.

What to watch next

• Tuesday, November 10: The October Consumer Price Index, the government's measure of what a basket of everyday goods costs. This is the big one. A hot reading backs up the two Fed officials who want a hike.
• Thursday, November 12: Freddie Mac's next weekly rate survey, the first to include jobs-report week.
• Friday, December 4: The November jobs report.
• Tuesday and Wednesday, December 8–9: The Fed's December meeting, with fresh economic projections.
• Thursday, December 10: November CPI, the day after the Fed decides.

The labor market showed up to October like it had somewhere to be. Now it's inflation's turn to talk, so keep your coffee warm on the 10th. ☕