By Tilly Armstrong Assistant Consumer Editor For Dailymail.Com
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Wall Street is reacting to one of the most important economic releases of the year Friday.
The Labor Department put out the jobs report for August, which will determine the Federal Reserve‘s policy for the coming months.
The Federal Reserve cutting interest rates at its next meeting this month is now seen as a certainty.
Mortgage rates are already on the way down, averaging at 6.35 percent for a 30-year fixed-rate deal, as of latest Freddie Mac data from September 5.
Benchmark borrowing costs do not directly affect mortgage rates, but home loans do track the yield on 10-year Treasury bonds.
The bonds are influenced by several factors including predictions around inflation, Fed actions and investor reactions as a result.
This means home loan costs will dip when banks think future cuts are likely.
Elevated mortgage rates have been a deterrent for homebuyers for the last several years, alongside high property prices and a shortage of homes for sale.
Declining mortgage rates would be a boost for those looking to refinance or buy a home, and experts hope this would begin to get the housing market moving.
Any extreme moves in the stock market will impact Americans’ 401(K) retirement accounts, which tend to be invested in the major indexes.
The shock jobs report last month sparked a major market sell-off, which saw stocks plummet and 401(K) holdings see their values hit.
The market has since largely recovered, however, and market reaction to August’s job report looks likely to be muted.
The Federal Reserve is expected to cut interest rates at its September meeting, and this latest report does not change that.
Investors will now be questioning by how much the Fed will cut rates.
The central bank has held benchmark borrowing rates at a 23-year high between 5.25 percent and 5.5 percent for over a year.
Markets are weighing up whether Chair Jerome Powell and Fed officials will cut interest rates by a quarter-percentage-point this month, or make a larger half-point reduction.
Stock futures fell on Friday as investors reacted to weaker-than-expected job growth in August.
The S&P 500 fell 0.6 percent, the Dow Jones Industrial Average dropped 0.4 percent and the Nasdaq slid 1 percent immediately following the release of the report.
While the unemployment rate met expectations, jobs growth was slower than economist forecasts.
In July, a weak report sparked a market sell-off, amid fears the US economy was heading for a recession.
The unemployment rate dropped to 4.2 percent in August, down from 4.3 percent the month prior.
The US economy added 142,000 jobs in August, below the forecast of 161,000.
This reflects a slower labor market, which should clear the way for a Federal Reserve rate cut later this month.