The jobs report released today was good news for Americans and the overall economy — but it could dash hopes for lower mortgage rates.

The U.S. economy added 256,000 non-farm jobs in December, according to the Bureau of Labor Statistics — far surpassing expectations of 153,000 new jobs for the month. The unemployment rate fell slightly to 4.1%, and even long-term joblessness (those out of work for more than six months) fell to 1.6 million after rising in recent months.

Wages rose 0.3% in December compared to the month before and 3.9% year-over-year. Those figures were generally in line with expectations, keeping that aspect of inflation under control for now.

Markets, rates reacted quickly: After the jobs report was released, investors responded almost immediately. By midday Friday, the stock market had posted a 600-point drop, and the 30-year fixed-rate jumped to 7.24%, according to Mortgage News Daily. That put rates at the highest level in more than a year.

“While the Fed may have downplayed the role of the labor market in guiding the rate outlook at the last meeting, the jobs report will ALWAYS matter to the bond market,” said Matthew Graham, chief operating officer for Mortgage News Daily, in an online post.

What’s ahead for rates: In light of the stronger-than-expected employment report, the Federal Reserve will most likely pause rate cuts during its next meeting at the end of the month. After that, the Fed doesn’t meet until mid-March, so the current short-term interest rate of 4.25%-4.5% could remain in place heading into the spring homebuying season. As of mid-December, the Fed was only forecasting two rate cuts in 2025, and the latest jobs data has some analysts speculating that rate hikes could now be possible this year.

The actions of the Fed don’t always push mortgage rates in the expected direction, however, and the same holds true for the economy — positive news might not lead to higher mortgage rates. But given current conditions, a strong employment report isn’t likely to help the rate situation, said Lawrence Yun, chief economist at the National Association of Realtors.

“More production and higher productivity can bring down inflation and interest rates. However, higher rates now are due to lingering inflation, which has not been fully contained,” Yun said. He believes “inflation will be much calmer in the future” — “but until then, mortgage rates will stick near the current elevated rates.”

Another housing trend to watch: A strong labor market, coupled with an increase in remote workers returning to the office in 2025, could impact housing trends in other ways, said Lisa Sturtevant, chief economist at Bright MLS.

“With more employers calling workers back to the office full-time, prospective home buyers are going to have different priorities,” Sturtevant said, noting that a recent Bright MLS survey found the most important neighborhood consideration for would-be buyers in 2025 was commute time.