Soft Jobs, Steady Inflation — Rate Cut Odds Climb

[Derek Brickley]

Week of September 8, 2025

The labor market is cooling faster than expected, inflation stayed right on script, and housing still looks solid. Here’s what stood out!

💼 Job Growth Revised Down by 911,000

The Bureau of Labor Statistics (BLS) quietly admitted it overstated job growth by nearly a million over the past year... That’s like finding out more than half the job gains we’ve been talking about never really happened. No wonder fewer buyers feel confident making a big move.

👉 Weaker labor data gives the Fed more room to cut interest rates. If people feel less secure in their jobs, policymakers will lean toward supporting the economy.

📉 Jobless Claims Hit a 4-Year High

New filings for unemployment benefits jumped to 263,000, the highest since 2021. People who keep collecting benefits after the first week (called “continuing claims”) have been above 1.9 million for 16 weeks straight. Unfortunately had a client get laid off in the process of buying their new home (they still were able to close, I can tell you more about this one another time) and that hesitation bleeds into housing decisions.

👉 A softer job market usually means lower borrowing costs ahead, as long as inflation doesn’t flare up.

📊 Inflation Meets Expectations

The Consumer Price Index (CPI), which measures the cost of everyday goods and services, rose 0.4% in August and is up 2.9% compared to last year. Core CPI — which strips out food and energy for a steadier read — held at 3.1%. Gas prices were the main driver this time. Markets didn’t panic, because they already expected numbers like this.

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👉 Inflation lining up with expectations keeps the door open for a Fed rate cut in September.

🏗️ Wholesale Inflation Cools

The Producer Price Index (PPI), which tracks costs for businesses, actually fell 0.1% in August. Over the past year, producer prices slowed to a 2.6% increase. Lower costs now usually mean less upward pressure on consumer prices later.

👉 This is the kind of backdrop the Fed wanted — easing inflation pressures that make it safer to cut rates.

🏡 Home Price Growth Slows, But Stays Positive

Cotality (formerly CoreLogic) reported home prices up 1.4% year-over-year in July. ICE Mortgage Monitor showed 1.1%. Forecasts still call for about 4% appreciation over the next year. Translation: homeowners are still building wealth.

👉 Even if mortgage rates stay elevated for a bit, limited supply plus steady demand should keep prices supported.

📅 What’s Next

The Fed meets Tuesday/Wednesday, and most expect them to cut rates. We’ll also see builder confidence, new construction numbers, retail sales, and jobless claims.

Catch you next week, Derek Brickley #LoansbyDB