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While unemployment rates have fallen to their lowest levels since 2025, they have not fallen for the right reasons. Many people who have dropped out of the labor force have also stopped looking for work, which can skew the unemployment numbers. This has been followed by a smaller-than-expected increase in hourly pay, which has continued to lag behind inflation, especially in the current environment.

This weakness has also been reflected in a reduction in overall payrolls, indicating an overall decline in employment. As a result, these labor market conditions could make the Federal Reserve more hesitant to raise rates.

U.S. Employment Rate
The U.S. unemployment rate fell for the second month in a row, to 4.1%, a level it last reached in June 2025. Ordinarily that would be good news. This time it wasn’t. The unemployment rate declined because 264,000 people dropped out of the labor force. In other words, they stopped looking for work.

Payroll
Economists surveyed by Bloomberg had expected a gain of 80,000 positions, an improvement from June’s revised addition of 20,000 jobs. Those predictions were dashed as leisure and hospitality dropped 40,000 roles as the World Cup wound down and local government positions fell by 57,000. Retailers also axed jobs. 

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw a decrease of -0.03%, bringing the current rate to 6.01%.
• 30-Year FRM rates saw an increase of 0.03%, bringing the current rate to 6.69%.

MND Rate Index

• 30-Year FHA rates saw a decrease of -0.06%, with current rate at 6.28%.
• 30-Year VA rates saw a decrease of -0.06%, with current rate at 6.30%.

Jobless Claims
Initial Claims were reported to be 199,000 compared to the expected claims of 204,000. The previous week landed at 198,000.

What’s Ahead
CPI and PPI inflation data will be released this week, while Consumer Sentiment and Retail Sales reports will provide a clearer picture of the overall economic outlook.