Meet the TeamBlogReviewsMortgage CalculatorsFirst-Time HomebuyersContact Us
Link Four
Link FiveLink SixLink Seven
Apply Now
Tips

Economic Data Building a Case For Rate Cuts

The CL Team
The CL Team
May 19, 2025

It may have been a shorter week than normal due to the holiday, but it was no less important with several economic reports adding to the case for rate cuts.

The first week of any given month typically hosts the same group of economic reports.  Several of these have a strong track record of causing volatility for rates.  Friday's jobs report is the perennial top dog, but the impact on rates depends on how far the results fall from forecasts.

In the current case, the job count was actually right in line with forecasts (a hair higher, actually).  That would normally be bad for rates, but there were several offsetting factors.  Chief among these were the large downward revisions to the job count (officially "nonfarm payrolls") from the past two reports.

The CL Team Nonfarm Payrolls (new jobs created)

It may not look like much on a chart, but this change is enough to make the recent trend look more like a labor market that's cooling off as opposed to one that's displaying mysterious resilience.  In addition to the headline job count, the unemployment rate also ticked higher, nearly reaching a level that some economists consider to be high-probability evidence of a recession.

The CL Team unemployment rate chart

To understand why economists might view this sort of parabolic bottoming to be an excellent indicator of trouble ahead, just consider what typically happens next (visualized in the following chart).

The CL Team unemployment rate chart

Of course the jobs report is only one piece of data and the unemployment rate is only one component.  Moreover, one could argue that if any moment in economic history has a chance to buck longer-term trends, the past 2 years are high on the list.  But that's why we look at other economic data too!

Of the week's other reports, the service sector index from ISM has the strongest track record of getting the market's attention.  Not only was that true this time, but ISM actually had just as big of an impact as Friday's jobs report.  

ISM doesn't usually hit nearly as hard as the jobs report, but this anomaly was fairly easy to reconcile with this particular ISM report being exceptionally weak.  In fact, if we throw out the initial covid lockdowns, this was the weakest ISM Services report since the Great Financial Crisis recession.

 

The CL Team ISM Services Index Chart

Taken together, both ISM and the jobs report painted a picture of an economy that is showing more conclusive signs of a slowdown.  This is one of the things the Fed wants to see in order to feel more confident about rate cuts.  As such, financial markets adjusted yields accordingly, erasing the rate spike that began last Friday.

The CL Team 10yr Treasury Yield chart

"Yield" is another term for "rate."  When bond yields fall, so do mortgage rates.  The same was true this week, but many headlines disagreed because they were based on Freddie Mac's weekly rate survey.  Freddie's methodology meant that last week's rate spike wasn't counted until the present week.  Moreover, Friday's improvement won't be counted until next week.  The daily tracking from Mortgage News Daily shows the real story.

The CL Team 30yr fixed mortgage rate indices chart

As for Fed Funds Rate expectations, there was certainly a response, but it wasn't nearly as big as the response seen to the last jobs report and the subsequent Consumer Price Index (CPI).

The CL Team Fed Funds Rate Expectations through December 2024 chart

Part of that has to do with the outright level of expectations being just below 5% for the end of the year.  That means the market sees at least one and possibly two rate cuts.  It would be a big deal for traders to bet on much more than that without confirmation from another rate-friendly CPI report.

With that in mind, the next release of monthly CPI data will be this coming Thursday morning!  As always, keep in mind that there is no way to know which side of the consensus will win, only that a big difference between reality and forecasts will almost certainly produce a big move.  

Share this post
It may have been a shorter week than normal due to the holiday last week, but it was no less important with several economic reports adding to the case for rate cuts.
https://clteam.us/post/economic-data-building-a-case-for-rate-cuts

Discover more articles.

Stay informed with more of our informative blog posts.

Spring Surge: Why Homebuyers Are Still Making Moves Even with High Rates

Spring Surge: Why Homebuyers Are Still Making Moves Even with High Rates

Buyers aren’t waiting for rates to drop—they’re making moves this spring. See why demand is rising, what’s impacting affordability, and how The CL Team is helping clients win in today’s market.
Read more
Some Uncertainty at The End of an Otherwise Decent Week

Some Uncertainty at The End of an Otherwise Decent Week

Markets wobbled to close an otherwise stable week. While weak retail data helped rates early on, a late-day credit downgrade and inflation concerns added fresh uncertainty heading into next week.
Read more
Why Buyers Are More Likely To Get Concessions Right Now

Why Buyers Are More Likely To Get Concessions Right Now

Buyers are gaining ground. With more inventory, builders and sellers are offering incentives like rate buy-downs, price cuts, and paid closing costs to help sweeten the deal.
Read more
View All
This is a Loan Production Office of Luminate Bank®
400 Executive Center Dr., Suite #108, Greenville, SC 29615

(864) 569-0741
origination@clteam.us

Hours: Monday to Friday 9am to 5pm
Our Company
HomeMeet The TeamReviewsContact Us
Resources
CL Team BlogFirst-Time HomebuyersMortgage CalculatorsApply Now
Social Media
LinkedIn
Facebook
Instagram

Caleb LeGrand NMLS 259691

Luminate Bank NMLS 1281698 Bank Headquarters 2523 S. Wayzata Blvd., Suite 100 Minneapolis, MN 55405 (952) 939-7200. This is not an offer to enter into an agreement. Information provided is outlining the minimum down payment requirements as allowed by specific loan program and product guidelines and any information, rates and programs are subject to change without prior notice and may not be available in all states. All loans are subject to credit and property approval. Luminate Bank is not affiliated with any government agency. All rights reserved. Member FDIC. Equal Housing Opportunity Lender.

Copyright © 2023-2022 CL Team at Luminate Bank. Made by Semmodo
Privacy PolicyCompany LicensesNMLS Consumer AccessAccessibility