Weak Jobs Data Raises New Questions for Rates

What Is Happening Today

Stocks are mixed and mortgage bonds are slightly lower this morning after a prolonged government shutdown was officially avoided. While that removes a major headline risk, markets are still dealing with limited economic data this week. ADP released weaker than expected jobs data, which should have helped bonds, but that benefit was largely offset by this morning’s Treasury Refunding Announcement, keeping rates under pressure.

Treasury Refunding Adds Supply Uncertainty

Treasury plans to keep issuance steady for the next several quarters
Language hinted at possible future increases in coupon and FRN auction sizes
More supply would need to be absorbed by the bond market
No immediate changes announced, limiting market reaction

The bond market did not panic, but the possibility of higher future supply was enough to cap gains and push yields modestly higher.

ADP Employment Report Signals Labor Market Weakness

Full-year 2025 job growth revised down to 398,000 jobs
Average monthly job growth in 2025 now near 33,000
January job creation came in at just 22,000 vs 48,000 expected
December revised slightly lower from 41,000 to 37,000

The data suggests job growth last year was significantly overstated and could weaken further once full revisions are completed.

Job Losses Concentrated In Larger Employers

Small businesses showed zero net job creation
Large businesses with 500+ employees shed 18,000 jobs
Medium-sized businesses added 41,000 jobs
Education and Health Services added 74,000 jobs

Without gains from Education and Health Services, the economy would have posted a net job loss, highlighting growing fragility beneath the surface.

Wage Growth Shows Cooling Labor Demand

Job stayers saw wages rise 4.5% year over year
Job switchers saw wage growth slow to 6.4% from 6.6%
Less poaching suggests weaker hiring competition

Slowing wage growth among job switchers is another sign the labor market is losing momentum.

Mortgage Applications Pull Back Slightly

Average mortgage rates dipped from 6.24% to 6.21%
Purchase applications fell 14% week over week
Purchase demand remains up 4% year over year
Refinance applications fell 5% but remain up 117% annually

Refinance demand remains strong, showing homeowners are still rate sensitive at current levels.

Final Takeaway

Today’s data reinforces the idea that the labor market was much weaker in 2025 than initially reported and that the slowdown is carrying into 2026. While softer job growth typically helps rates, Treasury supply concerns are keeping mortgage bonds from fully benefiting. Until clearer trends emerge, volatility is likely to remain elevated.

If you are wondering how this impacts your buying power, refinancing options, or whether now is the right time to lock or float, let’s talk. Whether you are getting pre-approved, exploring a refinance, or planning your next move, having a clear strategy matters more than ever.