Category: Uncategorized

BLS Jobs Report

The latest report from the Bureau of Labor Statistics showed the labor market weakening more than expected in February. The economy lost 92,000 jobs, a much softer result than the 59,000 job losses economists were anticipating.

Adding to the concern, prior months were revised lower by a combined 69,000 jobs. December, originally reported at 50,000 jobs, was revised all the way down to -17,000, while January was trimmed slightly to 126,000. There will also be another revision to January next month.

When you step back and look at the trend, it becomes clear how much of an outlier January’s number was. With December now at -17,000 and February at -92,000, the strength reported in January is unlikely to hold up once future revisions are made.

Looking deeper into the report, Healthcare lost 28,000 jobs, though a strike accounted for roughly 37,000 of those losses. Even when accounting for that, the overall report was weak, with most sectors seeing job declines.

For those suggesting the labor market remains stable, the recent averages tell a different story:

• 3-month average: 6,000 jobs per month

• 6-month average: -1,000 jobs per month

• 12-month average: 13,000 jobs per month

 

By any measure, job growth has slowed dramatically.

It’s also important to remember that the Jobs Report includes two different surveys. The Business Survey produces the headline job creation number, while the Household Survey is used to calculate the unemployment rate.

The Household Survey showed 185,000 jobs lost in February, while the labor force grew by 18,000 people. As a result, the unemployment rate rose from 4.3% to 4.4%, coming in slightly higher than expected. The actual figure was 4.44%, just shy of rounding up to 4.5%, which is something to watch in next month’s report.

Another notable development is that the average duration of unemployment rose to 25.7 weeks, the highest level in four years. This suggests that once someone loses a job, it’s becoming increasingly difficult to find new employment due to limited hiring.

From a mortgage and housing perspective, a weakening labor market is something the Fed watches closely. If this trend continues, it could increase the pressure for future rate relief, which would be welcome news for borrowers and the housing market.

Producer Price Index (PPI)

January’s Producer Price Index came in hotter than expected, reinforcing the theme that inflation pressures are proving sticky.

Headline PPI rose 0.5%, above the 0.3% forecast. On a year-over-year basis, inflation edged down slightly from 3.0% to 2.9%, but markets were expecting a cooler 2.6% reading.

Core PPI — which strips out food and energy and is the more important number for long-term rate direction — rose 0.8%, far above the 0.3% estimate. Year-over-year Core inflation increased from 3.3% to 3.6%, while expectations were for it to remain unchanged.

Bottom line: wholesale inflation pressures are not easing as quickly as the Fed would like. This keeps upward pressure on bond yields and prevents mortgage rates from moving meaningfully lower.

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Q2 Business Employment Dynamics (Reality vs. Headline Jobs Data)

The BLS Jobs Report continues to be one of the most market-moving releases each month. As we’ve been pointing out for some time, initial job growth numbers have been overstated and later revised lower — but those headline numbers have still been a key reason mortgage rates have stayed elevated.

A major factor behind the overstatement is the BLS “Birth-Death Model.” Because the Bureau of Labor Statistics only surveys roughly 670,000 businesses, it uses statistical modeling to estimate job creation from new businesses (births) and job losses from closures (deaths).

In April, May, and June of 2025, the Birth-Death model added 74,000 jobs to the reported totals.

Today’s updated data shows the actual figure was –321,000 jobs.

That’s a 395,000-job overstatement — from the Birth-Death model alone.

The weakness was broad-based:

• 41 out of 50 states showed quarter-over-quarter declines

• 69% of major industries declined QoQ

• 85% of major industries performed below normal

 

This tells us the labor market is not as strong as headline data previously suggested — and that matters greatly for future Fed policy and rate direction.

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Fed Commentary – Governor Miran

Fed Governor Miran indicated support for four 25 basis point cuts this year and suggested those cuts should come sooner rather than later.

If that sentiment gains traction inside the Fed, it would be supportive of lower rates. However, inflation data like we saw in PPI makes it harder for the Fed to move quickly.

NAR Housing Wealth Update

 

Real estate doesn’t always get the credit it deserves as a long-term wealth-building asset—but the data makes the case. Nearly two-thirds of total U.S. household wealth is held in home equity, and home values have increased in 78 of the last 83 years. There’s a reason homeowners have 44 times the net worth of renters. Homeownership remains one of the most consistent ways Americans build wealth, and it continues to be a cornerstone of the American Dream.

According to the National Association of Realtors, over the past five years the median homeowner increased their net worth by $150,000. That means half of homeowners saw gains even larger than that—despite higher rates, inflation, and economic uncertainty during that period.

Some markets have experienced modest pullbacks recently. However, in areas like Florida and Texas, where appreciation had been especially strong, homeowner net worth is still meaningfully higher over the five-year period. In many cases, these markets are simply giving back a portion of outsized gains—not reversing the long-term trend.

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Realtor.com Listing Data

 

Realtor.com reported that active listings declined 7% in January, though inventory remains up 10% year over year. While overall listings fell, new listings jumped 41%, a seasonal trend we typically see as agents delist homes in December and relist them in January to reset days on market.

The important takeaway is this: for active listings to decline month over month despite a surge in new listings, sales activity had to be strong. Buyers are still active, and homes are continuing to move.

Producer Price Index (PPI)

 

The December Producer Price Index came in hotter than expected, with headline prices rising 0.5% versus estimates of 0.2%. On a year-over-year basis, PPI held at 3%, even though markets were looking for a pullback to 2.7%.

Core PPI, which excludes food and energy, also surprised to the upside, rising 0.7% compared to expectations of just 0.2%. This pushed the annual core reading up to 3.3% from an upwardly revised 3.1%, while the market had been anticipating a decline toward 2.9%.

Digging into the details, goods prices were flat despite higher precious metals prices at the time of the report (which have since corrected). The increase was driven almost entirely by services—specifically machinery and equipment wholesaling margins.

Because the inflationary pressure was narrow and isolated to one area, the bond market largely shrugged it off. Bonds were already under pressure earlier in the day following Warsh’s announcement, and PPI did little to change that narrative.

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Apartment List National Rent Report

 

More encouraging news on the inflation front continues to come from housing. Apartment List reported that new rents fell another 0.2% in January. On a year-over-year basis, rents are now down 1.4%, a larger decline than the prior reading of 1.3%.

Time-to-lease has climbed to the highest level since Apartment List began tracking the data, pushing vacancy rates to 7.3%—also a record high since tracking began in 2017.

This matters because shelter makes up a significant portion of inflation reports. While CPI and PCE are still showing shelter inflation around 3.3%, real-time data is running closer to—or even below—1%. This disconnect suggests shelter inflation will continue to trend lower in future reports. Measures like Truflation are already reflecting this reality, which is why their inflation readings remain below 2%, even after accounting for tariffs.

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Productivity & Unit Labor Costs

 

Productivity remains a bright spot. Q3 productivity rose 4.9%, matching both expectations and the prior quarter. That follows a strong Q2 reading of 4.1%, highlighting sustained efficiency gains across the economy.

As productivity improves, unit labor costs continue to fall. Q3 unit labor costs declined 1.9%, in line with estimates and following an even larger 2.9% drop in Q2. Lower labor costs are inherently deflationary and help offset inflation pressures elsewhere.

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Jobless Claims

 

Initial jobless claims fell by 1,000 to 209,000, after the prior week was revised higher by 10,000. While this was slightly above expectations of 205,000, it remains historically low.

That said, we don’t believe this data fully captures what’s happening beneath the surface. Layoff announcements remain elevated, and the growth of the gig economy can mask labor stress. Many workers who lose full-time jobs don’t show up cleanly in the data if unemployment benefits aren’t sufficient and they’re forced to take on gig work to make ends meet.

Continuing claims fell by 38,000 to 1.827 million, marking several consecutive weeks of declines. Given weak hiring trends and elevated initial claims from six months ago, we believe this drop is more likely due to benefits expiring rather than a surge in new employment.

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NAR Realtor Confidence Index

The National Association of Realtors (NAR) released its Realtor Confidence Index for December, and the takeaway is straightforward: Realtors are increasingly confident that the first quarter of 2026 will be stronger than 2025.

Here’s what the December data shows:

• Homes sold above list price: 16%, unchanged from last year

• Cancellations: 5%, unchanged from last year

• Waived inspections: 18%, down slightly from 20% in December 2024

• Waived appraisals: 19%, up from 18% last year

• Average offers per home: 2.2, unchanged from last year

• Days on market: 39, up from 35 last year

• Cash sales: 28%, unchanged

• Investor purchases: 18%, up from 16% last year

• First-time homebuyers: 29%, down from 31% last year

 

Overall, these are solid metrics. Sixteen percent of homes are still selling above list price, and cancellations remain steady at just 5%. Not long ago, headlines were warning about “rising cancellations,” but the reality is that cancellations are never zero—and they haven’t increased year over year.

Nearly one in five buyers are still waiving inspections and appraisals, which is a clear sign of competition. Homes are receiving an average of 2.2 offers, reinforcing that multiple-offer situations are still common.

The one softer spot in the report was days on market, which increased modestly. We believe this figure was influenced by the same factors that weighed on the Pending Home Sales report—an unusually long holiday break in December and weather disruptions in parts of the country.

As for first-time homebuyers, this is a volatile data point that typically fluctuates between 27% and 33%. Because of that, we don’t get overly optimistic when it rises within that range, nor overly concerned when it dips.

Bottom line: Realtor confidence is improving, competition remains present, and the underlying housing market data continues to show resilience—despite what the headlines may suggest.

The Media Noise vs. the Real Housing Story

The media is back at it again.

ATTOM Data Solutions recently released an article with the headline, “U.S. Foreclosure Activity Increases in 2025.”That headline was quickly echoed by other outlets, including HousingWire, which added fuel to the fire with, “U.S. foreclosure filings rise 14% in 2025 as FHA borrowers face greater risk.”

At face value, headlines like these sound alarming. They’re designed to grab attention—and unfortunately, they can cause potential buyers to hesitate, thinking the housing market is on the brink of trouble or that a “better deal” is just around the corner.

But when you look past the headline and into the actual data, a very different story emerges.

Yes, foreclosure activity rose 14% in 2025 compared to 2024—but that increase came off extremely low levels. Foreclosures still represent just 0.26% of all properties, up marginally from 0.23% in 2024. In real terms, that’s roughly 367,000 properties nationwide, which remains historically low.

In fact, the only years with lower foreclosure activity were 2020 and 2021, when foreclosure moratoriums were in place and foreclosures were largely prohibited.

To put this in proper context, during the housing crisis in 2009 and 2010, roughly 2.23% of all properties were in foreclosure. Today’s levels are about one-tenth of that.

The Bottom Line: Foreclosure activity remains near some of the lowest levels on record. Housing is not cracking—it’s healthy. Buyers waiting for home values to meaningfully decline may be waiting a very long time. With rates stabilizing and likely moving lower, we expect activity—and home values—to pick up, not fall.

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Atlanta Fed Wage Tracker: A Cooling Signal

The Atlanta Fed’s Wage Tracker showed wage growth slowing on a year-over-year basis, easing from 4.0% in November to 3.7% in December.

Breaking it down:

• Job stayers saw wage growth slow from 3.7% to 3.5%

• Job switchers saw wage gains decline from 4.5% to 4.0%

 

This signals a cooling labor market. Fewer workers are being poached by competitors, and wage pressures are easing. That’s important, because slower wage growth typically leads to more restrained consumer spending—one of the key ingredients for moderating inflation.

When combined with the continued housing deflation we expect to see this year, these trends point toward lower inflation ahead.

Lower inflation puts downward pressure on rates and increases the likelihood that the Fed will have room to cut further later this year.

BLS Jobs Report – Crestone Take

 

The Bureau of Labor Statistics released the December Jobs Report, showing just 50,000 jobs created. On top of that, prior months were revised meaningfully lower. November was revised down from 64,000 to 56,000 jobs (with one more revision still to come), and October was revised further into negative territory—from -105,000 to -173,000. In other words, job growth continues to weaken.

Importantly, all of December’s job gains came from just two sectors:

• Health Care & Social Assistance: +39,000

• Leisure & Hospitality: +47,000

 

Health Care jobs are largely non-cyclical and not sensitive to economic conditions, while Leisure & Hospitality typically sees a seasonal bump in December due to holiday travel. Excluding these two categories, job growth would have been negative again.

The Jobs Report consists of two surveys:

• The Business Survey, which produces the headline job creation number

• The Household Survey, which determines the unemployment rate

 

While the headline job number was weak, the drop in the unemployment rate muted the market’s reaction.

The Household Survey showed 232,000 jobs added in December, but this data is extremely volatile. Over the last 11 months, total job growth in this survey has been just 57,000 jobs, or roughly 5,000 per month. The labor force declined by 46,000, and together these factors pushed the unemployment rate down from 4.5% to 4.4%. November was also revised lower, from 4.6% to 4.5%.

The broader U-6 unemployment rate, which captures underemployment, fell from 8.7% (the highest level in eight years) to 8.4%.

Adding to the frustration, the BLS acknowledged that in three separate months this year, the unemployment rate was understated by 0.1%. Those errors hurt mortgage bonds and kept rates higher than they otherwise would have been. While revisions like this could happen again, unfortunately they don’t help after the fact.

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Housing Starts, Permits & Builder Confidence

 

• Housing Permits: Down 0.2% to an annualized 1.41M; down 1.1% year over year

• Housing Starts: Down 4.6% to 1.25M; down 7.8% year over year

• Housing Completions: Up 1.1% to 1.39M, but still down 15.3% year over year

 

Bottom line: Builders are pulling back and limiting new supply. If rates fall as we expect, demand will increase—but builders can’t instantly respond. Supply takes time.

That imbalance creates opportunity. Buyers who act before rates fall further may benefit, because when demand outpaces supply, home values rise.

Fed Minutes — Key Takeaways

The Fed Minutes from the December 10 meeting were released yesterday afternoon and offered a clearer look at how policymakers are thinking as we head into the new year.

Overall, the tone leaned dovish. Most Fed members indicated they would like to cut rates further if inflation continues to ease along the expected path. That said, a subset of officials favored holding the Fed Funds Rate at current levels for some time, highlighting a still-divided committee.

On inflation, the consensus view was that price pressures would remain somewhat elevated in the near term, before gradually moving back toward the Fed’s 2% target. Importantly, most participants expect tariff-related inflation to fade and continued disinflation in housing to help drive progress. It’s also worth noting that this meeting occurred before the October and November CPI data was released. Those reports showed Core CPI falling from 3.0% to 2.6%, which likely would have contributed to a more optimistic tone had the data been available at the time.

The labor market discussion acknowledged continued softening, with the unemployment rate edging higher in September. However, these comments were also made before the November Jobs Report showed unemployment rising further from 4.4% to 4.6%. With that data in hand, the Fed’s assessment of labor conditions may have been even more cautious.

Most members pointed to survey data—such as job availability and planned layoffs—as evidence that labor market conditions are weakening. A minority noted that weekly jobless claims and job postings still suggest some stability.

Even so, the broader concern was clear: risks to the labor market are skewed to the downside. Several officials warned that in today’s low-hire, low-fire environment, a sudden increase in layoffs could push the unemployment rate materially higher. Others highlighted that recent job growth has been concentrated in sectors that are not economically sensitive—primarily healthcare and education—masking weakness elsewhere in the economy.

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Balance Sheet & Liquidity

On the balance sheet, the Fed explained that it began purchasing $40 billion per month in Treasury Bills due to declining reserves and liquidity concerns. While these purchases are expected to taper, the minutes suggest the Fed could buy roughly $220 billion in the first year, which is still meaningful.

While short-term Bill purchases don’t directly impact long-term rates, there’s an important nuance. If Treasury issuance shifts toward shorter maturities—resulting in less long-term debt being issued—while the Fed remains a buyer, it could help relieve pressure on longer-term yields over time.

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Bottom Line

The minutes paint a picture of a somewhat divided Fed, but the dominant themes are clear: inflation is expected to continue cooling, and the labor market faces growing downside risk. Combined with a more dovish Fed leadership and voting makeup next year, this backdrop continues to support the case for additional rate cuts.

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Jobless Claims

Initial Jobless Claims, which track first-time filings for unemployment benefits, fell 16,000 to 199,000 last week. While that number is low, it’s not particularly informative this time of year. Employers typically avoid layoffs around the holidays, and this report is historically skewed lower during Christmas weeks.

Continuing Claims declined by 47,000 to 1.886 million. While that’s an improvement from the recent readings above 1.9 million, seasonal effects may again be at play. Additionally, looking back 26 weeks shows a surge in initial claims at that time. Since benefits in many states expire after 26 weeks, some of this decline may simply reflect claims rolling off rather than improved hiring conditions.

GDP and Jobless Claims — What’s Really Going On

Yesterday we walked through the first look at Q3 GDP, which came in at a strong 4.3% annualized growth rate. On the surface, that sounds like a booming economy—but it doesn’t line up with how things actually feel on the ground. That disconnect highlights some of the shortcomings of GDP as a measure of real economic momentum.

GDP is reported on an annualized basis, meaning the activity that occurred during the quarter is multiplied by four. Small shifts can therefore create big headline numbers. And when you break down the formula—

GDP = Consumption + Investment + Government Spending + (Exports – Imports)

—you can see how the number can be distorted. Inventory build (part of investment), increased government spending, or fewer imports relative to exports—something we’ve seen recently due to tariffs—can all inflate GDP without signaling a healthier consumer.

That’s why we prefer to focus on Real Final Sales to Private Domestic Purchasers, which strips out inventories, government spending, and trade effects and zeroes in on true consumer demand.

Final sales rose 3% in Q3—still solid, but notably weaker than the 4.3% GDP print. More importantly, the year-over-year trend in final sales has been declining since 2023. Add in survey-based data, and the picture becomes even less optimistic. The Fed’s Beige Book continues to show contraction across its twelve districts, and consumer confidence readings remain deeply depressed.

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Jobless Claims

Initial Jobless Claims, which track first-time filings for unemployment benefits, fell by 10,000 to 214,000. While that’s a low number, it’s not especially telling this time of year. Employers rarely lay off workers heading into the holidays—unless they’re trying to play the Grinch.

That said, this data doesn’t fully align with the job losses we’ve been seeing in recent labor reports. One likely explanation is the rapid expansion of the gig economy. When workers are laid off and file for benefits, weekly payments—often capped around $400—frequently aren’t enough to cover basic expenses or insurance. As a result, many are pushed into gig work, driving for Uber or DoorDash just to make ends meet.

The number of gig workers has grown by an estimated 5 to 10 million over the past year. Without that outlet, we’d likely be seeing initial jobless claims closer to 300,000 per week.

Continuing Claims, which measure those who remain on unemployment benefits after their initial filing, rose 38,000 to 1.923 million. That’s near the highest level since November 2021 and reinforces a troubling trend: once someone loses a job, it’s taking longer to find a new one as hiring slows.

We already know the labor market has been weakening, especially after the delayed QCEW revisions, which pushed Q2 2024 data out to Q2 2025. Even so, recent monthly reports have shown outright job losses at times, with the unemployment rate climbing from 4.1% in June to 4.6% in November.

What’s masking much of that weakness is Healthcare and Education hiring. These jobs are largely immune to economic cycles and are always needed. Strip those out, and the picture changes dramatically. The remaining 83% of the economy has lost a combined 296,000 jobs since April.

Markets & Rates Recap

Markets wrapped up the week on solid footing. Stocks moved higher, with the Dow Jones Industrial Average up 183 points to 48,134 and the S&P 500 gaining nearly 60 points to close at 6,834. Mortgage bonds slipped modestly on the day, down about 6 basis points, pushing the 10-year Treasury yield 3 bps higher to 4.14%.

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Fed Commentary

Always-voting New York Fed President John Williams weighed in on policy restrictiveness and inflation dynamics. Williams estimates forward-looking inflation around 2.5% and places r*—the neutral rate that neither stimulates nor restrains growth—just under 1%, roughly 0.875%.

Using those assumptions, and subtracting inflation and r* from the current 3.625% Fed Funds rate, Williams believes policy is only modestly restrictive—by about 0.25%—and well positioned.

He also noted that inflation’s path hasn’t been linear. After a meaningful decline, progress stalled for a period, but Williams believes disinflation has resumed and pointed to encouraging elements within the latest Consumer Price Index report.

There has been some debate about distortions in that CPI data. Williams acknowledged that certain components—most notably shelter—were carried forward from September, effectively showing no inflation for the month. While we’ll need to see how future reports evolve, the key takeaway is that these numbers are now locked in, providing a favorable base effect over the next year. A similar or better reading next month would likely quiet skepticism and drive a stronger market response.

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Existing Home Sales

Existing Home Sales, reported by the National Association of Realtors, rose 0.5% in November to an annualized pace of 4.13 million units, roughly in line with expectations. October sales were revised higher, and when accounting for that, November activity was effectively up about 1%. Sales remain down roughly 1% year over year.

This data largely reflects buyers who were shopping and signing contracts in September and October, before mortgage rates reached their recent lows in mid-to-late October. While rates are no longer at those lows, average mortgage rates over the past three months are still the lowest we’ve seen since 2022.

At 4.13 million units, sales activity remains well below the more typical 5–5.5 million range, underscoring the continued buildup of pent-up demand.

The median home price declined 1.4% to $409,200, but it’s important to remember that this figure reflects the midpoint of homes sold—not true appreciation—and can be skewed by changes in the mix of transactions. Broader appreciation measures show national home values still rising at just over 1% year over year.

Inventory stood at 1.43 million homes at the end of November, down nearly 6% from October but still up 7.5% from a year ago. Seasonal declines in inventory are typical this time of year.

At the current sales pace, supply sits at 4.2 months—still tight compared to a more balanced market around 4.6 months. Homes are taking slightly longer to sell, averaging 36 days on market versus 34 in October and 32 a year ago.

Additional details:

•18% of homes sold above list price, unchanged from last year

•Cash buyers accounted for 27% of sales, up from 25%

•Investors made up 18% of transactions, up from 13%

•First-time buyers represented 30% of purchases, down from 32% last month and unchanged year over year