Blog posted January 14th 2025
By Don Almeida – Mortgage Expert and President of Happy Home Mortgage.
In December 2025, U.S. job growth exceeded expectations, with nonfarm payrolls increasing by 256,000, according to the Bureau of Labor Statistics (BLS). This was a significant rise from November’s revised figure of 212,000 and well above the Dow Jones forecast of 155,000. The unemployment rate fell to 4.1%, slightly lower than anticipated, while a broader measure of unemployment, which includes underemployed and discouraged workers, decreased to 7.5%, its lowest level since mid-2024.
Key Highlights:
- Job Growth Across Sectors:
- Health care added 46,000 jobs.
- Leisure and hospitality grew by 43,000 positions.
- Government jobs increased by 33,000.
- Retail rebounded with a 43,000-job gain, following a loss of 29,000 in November.
Implications for the Housing Market and Mortgage Rates
The stronger-than-expected job growth and lower unemployment rate could add upward pressure to mortgage interest rates. As labor market strength reduces the likelihood of Federal Reserve rate cuts, long-term Treasury yields—often tied to mortgage rates—may remain elevated. This could lead to higher borrowing costs for homebuyers, potentially cooling housing demand, especially for first-time buyers and those in high-cost markets.
However, wage growth slowing to an annual rate of 3.9% might provide some relief to housing affordability concerns. With income growth slightly lagging behind housing price increases in many regions, the stabilization of wage inflation may signal more balanced conditions for the housing market in the long term. Industry analysts will closely watch upcoming inflation data and Fed decisions, as these will heavily influence mortgage rate trends and overall housing market dynamics.
Market Reactions and Federal Reserve Implications:
The robust job report fueled concerns over the Federal Reserve’s monetary policy. Treasury yields spiked, and stock market futures dipped as traders adjusted expectations for rate cuts. Analysts suggest that the data may reduce pressure on the Fed to lower rates, with market-implied probabilities of a single rate cut in 2025 now standing at 68.5%.
Broader Economic Implications:
The labor market remains resilient despite lingering inflationary pressures. Chicago Fed President Austan Goolsbee emphasized the significance of the robust report, viewing it as a sign of stabilization near full employment levels. However, inflation, particularly in housing costs and goods, continues to challenge the Fed’s 2% target.
As markets await forthcoming inflation data, economists like Ellen Zentner from Morgan Stanley suggest the Fed is unlikely to pivot toward rate cuts in the short term.
Sources:
- Bureau of Labor Statistics (December 2025 Employment Report)
- Comments from Chicago Fed President Austan Goolsbee
- Analysis from Dan North, Allianz Trade, and Ellen Zentner, Morgan Stanley
- Mortgage market insights and data trends (source attribution to industry publications and economic analysis reports)
