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Investors went into today’s jobs report expecting weaker numbers, largely due to disappointing economic data earlier in the week. Reports on private payrolls and service sector growth had hinted at a possible slowdown, so the bond market had already started adjusting in anticipation of a weak headline number.

When the actual jobs report came in showing 139,000 new jobs, just slightly above expectations, traders had to reverse course. It wasn’t a strong report, but it also wasn’t weak enough to support a further drop in bond yields. The market also took note of a downward revision to last month’s numbers, but even after that change, job growth still looks solid in the bigger picture, especially with unemployment holding steady at 4.2%.

For homebuyers, the takeaway is that today’s report didn’t deliver the kind of weak economic signal that usually pushes mortgage rates lower. As a result, rates remain relatively stable to close out the week.

Mortgage rates were slightly lower this morning as bond prices climbed early in the session, but those gains didn’t last long. Within about 20 minutes, the market reversed direction, which often signals that investors are reacting to something more than just the day’s economic data.

Two global events seem to have played a role. First, there was a phone call between former President Trump and Chinese President Xi, which triggered sharp moves in the stock market. Stocks jumped when the call was announced but then quickly dropped once it ended without any meaningful updates. Second, a policy announcement from Europe’s central bank caused changes in foreign bond markets, which often influence U.S. bond trends as well.

In the end, all the excitement pushed bond prices back toward where they started, leaving mortgage rates relatively unchanged from yesterday. For homebuyers, this is a reminder that rates can shift even without major U.S. economic data, especially when global politics or central bank actions come into play.

This morning brought two key economic reports, both showing weaker results than expected, which gave bond prices a boost and helped bring mortgage rates slightly lower.

First up was the ADP employment report, which showed only 37,000 new private sector jobs were added in the past month, well below the 115,000 that economists had predicted. While this report doesn’t always line up perfectly with Friday’s more important government jobs report, it still gives investors a reason to anticipate a cooling job market.

The second report, on the health of the services sector (which includes everything from restaurants to real estate), also showed signs of slowing. Most of the growth numbers came in lower than expected. However, one part of the report, the employment index, ticked slightly higher, and the prices paid by businesses continued to rise. That price pressure can be a red flag for inflation, which tends to push rates higher.

So while today’s weaker overall data helped pull bond yields and mortgage rates, down a bit, markets are still watching inflation trends and Friday’s jobs report closely for a clearer direction.

Mortgage rates started the day with some potential for improvement thanks to a modest overnight rally in the bond market. Bond yields had dipped slightly, which usually points to lower mortgage rates. But that rally faded quickly once new job market data came in stronger than expected.

The number of job openings came in higher than analysts predicted, signaling continued strength in the labor market. For homebuyers, this matters because when the economy shows signs of strength, investors often pull money out of bonds and shift it to stocks. As bond prices fall, yields and mortgage rates tend to rise.

Adding to the pressure was a comment from a Federal Reserve official suggesting that interest rates may need to stay elevated longer than markets had hoped. While the impact on mortgage rates wasn’t dramatic, it was enough to keep them from moving lower today.

Today’s ISM Manufacturing report, a key indicator of economic health, came in weaker than expected. For homebuyers, this matters because softer economic data can ease pressure on interest rates, including mortgage rates. While the report didn’t spark a dramatic market reaction, it likely helped prevent rates from rising further.

With no other major data released today, investors are paying close attention to any signs of economic slowdown, which can influence how the bond market behaves. Since mortgage rates tend to follow the direction of bonds, even small shifts in economic reports like this can help shape where rates are headed next.

The Week Ahead

Here are the key economic events scheduled for the next seven days that could influence mortgage rates:

Tuesday, June 3 – Factory Orders (April)
This report tracks the total value of new orders placed with manufacturers. An increase suggests stronger economic activity, which can lead to lower bond prices and higher mortgage rates. Conversely, a decrease may indicate a slowing economy, potentially boosting bond prices and lowering rates.

Wednesday, June 4 – Beige Book Release
The Federal Reserve’s Beige Book summarizes economic conditions across various regions. Positive assessments can signal economic strength, possibly leading to higher rates. Negative or cautious outlooks may have the opposite effect.

Thursday, June 5 – Weekly Jobless Claims
This report provides the number of individuals filing for unemployment benefits. A lower number indicates a robust job market, which can decrease bond prices and increase rates. A higher number may suggest economic weakness, potentially leading to higher bond prices and lower rates.

Friday, June 6 – Employment Situation Report (May)
This comprehensive report includes data on job creation, unemployment rates, and wage growth. Strong job growth and rising wages can lead to lower bond prices and higher mortgage rates. Weak job numbers may boost bond prices and reduce rates.

Friday, June 6 – U.S. Trade Balance (April)
The trade balance measures the difference between exports and imports. A larger deficit can be seen as a negative economic indicator, potentially increasing bond prices and lowering rates. A smaller deficit might have the opposite effect.

Understanding the Impact
Mortgage rates are closely tied to the bond market. When bond prices rise, yields (and thus mortgage rates) tend to fall. Strong economic news often leads investors to favor stocks over bonds, decreasing bond prices and increasing rates. Conversely, weak economic data can make bonds more attractive, raising their prices and lowering rates. Keeping an eye on these reports can help you anticipate potential changes in mortgage rates.

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Today’s PCE inflation report—one of the government’s main measures of consumer prices—came and went with little fanfare. While it’s technically more comprehensive than the CPI report, it tends to have less impact on markets because it’s released later and is easier for traders to predict based on other data. For homebuyers keeping an eye on mortgage rates, that means today’s inflation numbers didn’t offer much in the way of surprises or rate movement.

Instead, market attention is shifting toward month-end trading activity, which can cause unpredictable movements in bond markets. Since mortgage rates are closely tied to bonds, these fluctuations can still influence rates in the short term, even if they’re not tied to major economic news. The bigger picture? Markets remain more focused on how inflation trends will play out over the next few months as the impact of tariffs and other policies becomes clearer.