Mortgage rates are dropping fast after a shock jobs report set off a series of dominoes on Wall Street—The housing market can thank Detroit’s striking auto workers

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But everything may have just changed Friday, when the Labor Department issued its monthly jobs report with a shockingly low number — just 150,000 jobs were created last month, 20,000 fewer than forecasted and barely half of the 297,000 gain seen in September. 

The news helped push the average 30-year fixed mortgage rate below 7.4% on Friday, its lowest level in two months, relieving some of the pressure on the housing market. Mortgage rates tend to track the 10-year Treasury yield, and that plummeted on Friday, illustrating that investors could be anticipating interest rate cuts from the Federal Reserve.

And while a cooling labor market might not be great for the average American, it’s definitely good news for the Fed officials who have been hoping to slow job growth amid their nearly two-year-long battle with inflation.

“Score another goal for the Fed,” Ronald Temple, chief market strategist at Lazard, said of the latest labor market report, arguing that the weaker than expected jobs and earnings growth are evidence that inflationary pressures are cooling. “This news affirms yet again that the Fed should end the rate hike cycle and can shift now to contemplating what conditions would warrant the first rate cut in 2024.”

Stock market investors were quick to react to the news that the Fed’s hiking cycle may be coming to an end. The S&P 500 jumped more than 1% on Friday, while the tech-heavy Nasdaq popped 1.4%. Both indexes managed their best weekly performance since November 2022.

As for prospective homebuyers seeking a way out from a historically unaffordable housing market, this initial drop in mortgage rates raises hopes of sorely needed relief. After former Fortune housing editor Lance Lambert, and co-founder of Resiclub, tweeted on Friday: “The average 30-year fixed U.S. mortgage rate falls to 7.36%. That’s down 67 bps from the 23-year high hit last month of 8.03%. That’s the lowest reading since Sept. 20th.”

Conor Sen, the Bloomberg Opinion columnist who specializes in macroeconomics and housing, responded on behalf of the crowd: “We’re so back.”

But is the slowdown real? 

There is one caveat to the story of Wall Street cheering a cooling labor market: Historically high strike numbers could be keeping October’s job creation figures artificially low. Last month’s strikes by auto workers at Ford, GM, and Stellantis, combined with a Hollywood actors’ strike that has been ongoing since May, surely pulled down employment figures. The economy technically lost 35,000 manufacturing jobs in October, but nearly all were in the motor vehicles and parts sector, where workers are striking.

While the United Auto Workers’ strike accounted for a major portion of the monthly misfire in job creation, some experts believe there were still signs of a cooling labor market, noting that September’s job creation number was revised down by 39,000.

“Although this month’s number is artificially (and temporarily) lower because of the striking workers which will be added back in, the revisions lower in prior months exceed the size of that adjustment, potentially showing a true cooling trend, even when accounting for the striking workers,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, explained.

Kathy Bostjancic, chief economist at Nationwide, echoed Zaccerlli’s comments on Friday. “Even accounting for the auto strikers which were a drag of 32,000, there is a clear downward trend in employment growth,” she said.

The cooling labor market will likely help boost markets and lower mortgage rates as investors anticipate the end of the Fed’s rate hiking campaign.

The mortgage-rate drop is striking. One day after Realtor.com wrote that “Housing costs have just hit a ‘new record,’” the site noted that mortgage rates “abruptly reversed course.” Over at Redfin, economics team head Chen Zhao noted that rates had fallen “considerably,” which was “bringing some relief for homebuyers.”

Before the latest jobs report, housing market affordability was so bad that Zillow estimated it would take the average buyer 13.5 years to see a return on their investment. That’s more than double the historical average of roughly six years.

If thousands of UAW workers who were fighting for better conditions managed to move the economic data for one month and stave off future interest-rate hikes from the Fed, that would be a huge, albeit accidental accomplishment that will go a long way to improving the average American’s standard of living. 

Still, it’s only good news if it lasts, and if the job numbers indeed turn out to be a fluke, instead of a momentary pause on the plummeting path to mass joblessness. The rise in the unemployment rate has been so steep that the economy now sits a hair’s breadth away from recession, according to the Sahm rule, a metric named for former Federal Reserve economist Claudia Sahm, that has the distinction of predicting recessions with complete accuracy. On the other hand, at 3.9%, it’s close to historical lows dating back to the late 1970s.

And while a recession would certainly bring home prices, asset prices, and other measures of inflation way down, it would plunge many more Americans into misery. “A recession would likely bring mortgage rates down considerably,” said Zhao, “but it would also remove some people from the homeownership path if they lose their jobs.”