Labor Strength Nudges Rates Higher

[Andrew Postell]

Treasury yields moved higher today, with the 10-year note climbing to 4.11%, up three to five basis points across the curve. The move came after jobless claims fell to their lowest level since 2022, signaling labor market resilience despite recent ADP data showing job losses in November. Initial Jobless Claims fell to just 191k, versus 218k last week. This stronger-than-expected claims report suggests employers are still holding onto workers, reducing near-term recession fears and prompting a modest sell-off in Treasuries.

The market still anticipates a December 10 Fed rate cut, which would mark the third consecutive reduction, but today’s labor data slightly complicates the narrative. While futures continue to price in roughly a 90% probability of a cut to the 3.5%–3.75% range, the tone has shifted from “automatic” to “data-dependent.” Strong employment signals could limit the Fed’s urgency to ease aggressively, reinforcing a cautious approach even as policymakers aim to support growth.

Mortgage rates edged up in sympathy with Treasuries. This uptick underscores how sensitive long-term rates remain to labor data and Fed guidance. For originators, the near-term outlook still favors improved affordability if the Fed cuts next week, but today’s move is a reminder that strong labor prints can temper the pace of rate relief.

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