Portland Mortgage Market Update — June 6, 2025

It was Jobs Week this week! I always struggle with my verbiage during these weeks because higher unemployment usually leads to an improvement in rates. But I don't want to sound jubilant when discussing this happening because I know that each percentage point of unemployment means millions of people out of work. But in our lines of work, lower rates means more business. So, taking that into consideration, here is a summary of what was released the first part of the week:

• ADP report showed only 37K new jobs being created vs the 115K expected. • ADP report revised last month's numbers downward by 60K (will this month's numbers be likewise revised into a negative?) • Challenger, Gray and Christmas, the nation's oldest executive outplacement firm, released a report that job cuts have accelerated in recent months due to Tariffs • Year to date, employers announced around 696K job cuts. The first 5 months of the year, there are about 386K job cuts. • The Fed Beige Book report was also released showing a worsening of stagflationary conditions

So we have three separate independent entities all stating that the jobs market is heading in a similar direction- things are getting worse and doing so quickly. The stage was set for today's BLS report to come in and FINALLY deliver what the market is feeling.

Narrator: They did not deliver what the market was feeling. The BLS report somehow reports that Nonfarm Payrolls increased 139K for the month and unemployment somehow remained steady at 4.2%, despite every other report indicating the contrary. What makes this more infuriating is a WSJ article that dropped on Wednesday about the BLS's methodology and quality of data. The article stated that when it comes to inflation, the BLS calls out to various government workers (called "enumerators") to get a "feel" for what prices are doing in their region. When they can't reach the enumerators, the BLS tries to make a guess based on substitutions. The article also stated that the BLS had difficulty in recent months getting these accurate numbers due to staffing shortages. In short, the BLS is reporting higher than expected payrolls DESPITE the fact they are not staffed enough to do their work accurately AND the people they rely on for their data have recently been fired. The Dow is rallying on this better than expected report and mortgage rates are worsening.

Deregulation to save the day? Treasury Secretary Scott Bessent has been talking about loosening regulations on banks in recent months. Currently, if a bank wants to buy Treasury bonds, they have to keep a certain amount of capital on hand. By lower the capital requirement, treasury auctions gain a larger investor pool which should help drive yields down and lower interest rates. The Senate Confirmed Fed Chair Michelle Bowman as the new Vice Chair for Bank Supervision, and she indicated she will do a deep review of bank regulations and is planning on hosting a conference in July with bankers, academics and capital experts to discuss the capital framework and potentially make tweaks to bank capital requirements. Interestingly, Bowman comes from a banking family, with her family owning Farmers & Drover's bank. After working there for a time, she was the Kansas Banking Commissioner until she joined the Fed. So, she might actually be uniquely suited for this position.