August 2025 Jobs Report & What It Means

**Sources (with links) used for this article are compiled at the bottom. These sources would also be good for further reading/research into the topic.

A Slowing Job Market and Rising Unemployment

August’s employment report confirms what many in the industry have felt since spring... the job market is pumping the brakes. The U.S. added only 22,000 jobs in August, a tiny increase that shows how hiring has stalled since April. For context, monthly job gains were 142,000 in August 2024, so this is a significant downshift. At the same time, the unemployment rate ticked up to 4.3% (from 4.2% in July), marking the highest jobless rate since late 2021. In other words, more people are looking for work now than in recent months.

What’s Driving This Weakness?

Several sectors actually lost jobs in August, offsetting gains elsewhere.

Federal government employment dropped by 15,000, part of a larger pullback since January that has seen nearly 100,000 federal jobs cut.
Manufacturing also shed jobs (down 12,000 in August) and has 78,000 fewer factory workers than a year ago. Manufacturing’s struggles aren’t too surprising, given higher interest rates and even some strike activity dampening output.
Other pockets of decline included wholesale trade (-12,000 jobs) and mining/oil & gas extraction (-6,000), indicating broad-based softness.

Bright Spots

On the flip side, there were still bright spots like health care and social assistance, which together added roughly 47,000 jobs in August. Health care alone hired +31,000 new workers, a solid gain, though even that was slower than its usual monthly growth (this sector had been averaging +42k jobs per month over the past year).

In other words, even the strong sectors are cooling off a bit. The same goes for social assistance jobs (+16,000), which continued to trend up but not at breakneck speed.

Losing Momentum

These mixed signals leave us with a labor market that, while not collapsing, is losing momentum. As one economist put it bluntly, “the labor market has hit stall speed."

Companies seem cautious about hiring until they see where the economy is headed. For real estate agents and MLOs, this backdrop sets the stage for how the housing market might evolve moving into fall.

Wages Steady, Hours Steady... Good News?

Amid the gloomier hiring numbers, worker pay is still rising at a healthy clip. Average hourly earnings increased 0.3% in August, and were up about 3.7% compared to a year ago. Wage growth has slowed slightly from earlier in the summer (annual pay increases were around 3.9% in July), but 3.7% is still a decent gain.

For perspective, if inflation is running roughly 3% or less, that means many workers are finally seeing their paychecks grow a bit faster than prices. Steady income growth is a key ingredient for homebuyer affordability, especially with today’s higher borrowing costs.

As Realtor.com’s chief economist Danielle Hale noted, “ongoing wage growth is one of three keys needed to restore homebuyer affordability.”

Average Workweek

Also notable... the average workweek held flat at 34.2 hours. Employers haven’t started cutting hours in aggregate, which means overall weekly pay for workers isn’t shrinking. In manufacturing, the workweek even edged down just slightly to 40.0 hours, but nothing too alarming yet.

Stable hours combined with modest wage gains suggest workers who do have jobs are maintaining their income levels. That consistency can support consumer spending (including on housing) even as job growth slows.

Long-Term Unemployment

However, one concerning trend is the rise in people who’ve been unemployed long-term. The number of Americans jobless for 27 weeks or more is now 1.9 million, and long-term unemployed account for about 26% of all jobless individuals. That share has grown by roughly 385,000 over the past year.

Why does this matter for housing? Long-term unemployment can erode finances and creditworthiness. People out of work for 6+ months may burn through savings or fall behind on bills, making it harder for them to qualify for loans or consider a home purchase down the road. It’s an indicator that a subset of households could be facing real financial challenges, even if the headline unemployment rate is still relatively low by historical standards.

Underemployment

We should also mention underemployment. About 4.7 million people are working part-time involuntarily. They want full-time jobs but can’t find them or have had their hours cut. This number hasn’t spiked recently (it “changed little” in August), but it’s elevated compared to the boom times.

For real estate, a worker stuck in part-time gigs likely has a harder time saving for a home or qualifying for a mortgage. Lenders scrutinize stable income. A patchwork of part-time work can make that more complicated. It’s another subtle sign of labor market softness that could pinch some aspiring homebuyers.

How Could a Softer Job Market Impact Housing?

Slowing job growth and a rising unemployment rate can impact homebuyer demand in several ways. First, consumer confidence often follows the job market’s lead. When people hear that “unemployment has risen, and new hiring has ground to a virtual halt”, they tend to grow more cautious. Prospective buyers might delay house-hunting if they’re worried about layoffs or less optimistic about their future earnings.

We’ve been through a red-hot housing market in recent years, but now we’re in what one analyst called a “cruel summer for the housing market.” Activity has cooled, and buyers, sellers, and builders are all a bit frustrated. A weaker labor market could prolong that cool-down as some buyers sit on the fence until the economic outlook feels safer.

Real Estate Agents - Fewer Active Lookers & Purchasers

For real estate agents & MLOs, this might mean fewer clients actively looking or clients taking longer to pull the trigger on a purchase. Homes might spend more days on market as demand softens.

We’ve already seen home sales volume stuck at low levels in many areas, and the jobs data suggests no sudden surge of eager buyers is on the horizon. In fact, if layoffs pick up in sectors like manufacturing or government, certain local markets could see a dip in demand as affected workers tighten their belts.

On the bright side, it’s not all doom and gloom: at 4.3%, unemployment is still far below recessionary levels of the past. Many who want jobs still have them. It’s just that growth is slowing. So we’re talking softening, not free-fall.

MLOs - Ripple Effects

Mortgage lenders and loan officers will also feel the ripple effects. When employment was growing like a weed and the jobless rate sat near 50-year lows, we had a large pool of confident, employed buyers with solid incomes.

Now, with hiring slowing, fewer people might be changing jobs or getting big promotions, events that sometimes trigger home purchases or let buyers qualify for bigger loans. If unemployment inches up further, lenders could see more applicants who have recent gaps in employment or less job security, requiring extra documentation or conservative underwriting.

There’s also a potential upside for lenders... if economic uncertainty nudges the Federal Reserve to cut interest rates, it could spur a wave of refinance activity from existing homeowners and possibly draw some new buyers in.

In fact, this latest weak jobs report “sealed the case for a Federal Reserve interest rate cut later this month,” according to Reuters analysts.

Markets are now expecting the Fed to trim rates at the mid-September meeting, which has already led to a drop in mortgage rates.

Mortgage Rates

Yes, mortgage rates are finally (slightly) coming down. The bond market liked the bad jobs news. Yields on the 10-year Treasury fell after the report, pulling mortgage rates down with them. By the week’s end, 30-year fixed mortgage rates had dipped to around 6.5%, the lowest in nearly a year.

For anyone in our industry, that’s a huge development. High rates have been a primary culprit in cooling the housing market, so even a modest slide in rates can entice some sidelined buyers to re-engage.

Real estate agents might find a few more folks at open houses saying, “Hey, 6.5% isn’t great, but it’s better than 7.5%. We can work with this.”
MLOs may see an uptick in loan inquiries or refinancing applications from borrowers who bought when rates were peaking last year. Those who locked in loans above 7% could potentially refinance to shave a percent off now, which improves affordability and monthly cash flow.

Importantly, experts caution not to over-promise clients an immediate windfall from Fed moves. The Fed’s rate decisions influence, but do not directly set, mortgage rates. As one housing economist noted, people shouldn’t expect an instantaneous drop in mortgage rates on Fed announcement day. Markets move in anticipation.

Still, the trend is positive... a cooler economy is taking pressure off interest rates. And that could partially counteract the drag of a weaker labor market on housing demand.

Affordability, Income Trends, and the Housing Outlook into Fall

For now, home affordability remains a challenge. Price growth has moderated in many markets, but the combination of high home prices from the past few years and 6-7% mortgage rates has squeezed budgets. The August jobs report doesn’t change that overnight. However, steady wage gains of ~3-4% a year, if sustained, will gradually help buyers catch up a bit to housing costs.

In some locales, incomes are rising fast enough that buying power is actually improving slightly despite higher rates. Generally though, most buyers are still feeling the affordability pinch.

As agents and MLOs, it’s worth watching the trajectory of wage growth. If we start to see that number slip (say, toward 2% increases), it could signal even more affordability strain ahead. Conversely, if wage growth stays solid or even picks up while inflation stays in check, that’s a positive sign for our clients’ finances.

Full-Time vs. Part-Time

Another factor to monitor is the mix of full-time versus part-time jobs. With 4.3% unemployment, some folks are picking up part-time work or “gig” jobs to make ends meet. The more we see people cobbling together income streams, the trickier it can be for them to qualify for home loans. A steady 40-hour salary job is gold in the eyes of underwriters.

So if the labor market deteriorates to where underemployment rises (watch metrics like the part-time-for-economic-reasons figure, which is currently 4.7 millionbls.gov), it might signal more buyers needing alternative financing solutions or longer timelines to prepare for a mortgage.

As professionals, we should be ready to guide clients who are in these less-than-ideal employment situations, perhaps encouraging them to stabilize income or save larger down payments to offset risk factors.

Worth Keeping An Eye On

Looking ahead to the fall and Q4 housing season, a few things are worth keeping an eye on.

Further shifts in the job market. Each monthly jobs report will either confirm the slowdown or surprise us. If hiring stays weak or turns negative (job losses), that could dampen consumer confidence further and lead to even softer home sales. On the other hand, if we see an unexpected re-acceleration in hiring or a drop in unemployment, it might bolster sentiment. Real estate tends to lag the broader economy a bit, but big labor news will eventually flow through to housing activity.
The Federal Reserve and interest rates. As noted, the weak August jobs data has many convinced the Fed will start cutting rates sooner rather than later. Rate cuts could bring mortgage rates down more, which would be a boon to buyers’ budgets. However, if upcoming inflation reports run hot, the Fed might hold off, and mortgage rates could bounce up again. For agents and MLOs, it’s a time to stay nimble. If a client is ready to go now, locking in a mortgage rate at these multi-month lows could make sense rather than gambling on deeper cuts.
Housing supply and demand dynamics. The fall usually sees a dip in buyer traffic compared to spring/summer. This year, we’ll see that seasonal cooldown layered on top of an already cooler market. If job market worries mount, sellers might need to price more competitively or offer concessions to attract the fewer active buyers. Homebuilders, who have been one of the few adding inventory to the market, will also be watching mortgage applications closely. A weaker labor market and higher financing costs for builders could slow new construction, which isn’t great for inventory relief. That said, if mortgage rates continue slipping under 6.5%, we might get a small burst of activity from buyers trying to capitalize on improved rates before the holidays.

TLDR...

The August 2025 jobs report delivered a sobering picture... hiring has essentially flatlined, and unemployment, while still modest, is creeping up. For those of us in real estate and mortgage lending, it’s a call to adjust our expectations and strategies. A softer job market can tap the brakes on housing demand, but it also opens the door to lower interest rates, which can perk some of that demand back up. The key is balancing these forces.

If you’re an agent or MLO, be prepared to counsel clients through mixed signals. Some buyers will be nervous about the economy. You can share that the job market is softer but not falling off a cliff, and emphasize steps like getting pre-approved and staying within budget to weather any uncertainty. Highlight the positives... rates are a tad better, and home shoppers face a less frenzied market now, with more room to negotiate (sellers are indeed resetting expectations and more willing to deal). For homeowners, this could be a window to refinance or take out a home equity line if they’ve been on the fence, thanks to the dip in rates.

And of course, keep an ear out for what the “big picture” folks are saying. Reputable economists on Wall Street and in housing research are parsing these trends closely. Many see this labor market cooling as a sign that the economy is “skating as close to the edge of recession as you can get,” which means caution is warranted.

Others point to wages holding up and inflation easing, hoping for a “soft landing.” Either way, by staying informed on these developments, we can better guide our clients and adjust our business plans. The jobs report is a temperature check on our economy, and right now the thermostat is reading a bit cooler.

As we head into the final quarter of the year, that cooler economic climate will play a big role in shaping the housing market’s trajectory. Let’s keep watching the data, supporting our clients, and we’ll get through this seasonal and economic transition together.

As always, Keep Calm and Sell On!