A home against a backdrop of data lines.
Illustration by Lanette Behiry/Real Estate News

Slow job growth could signal an economic shift 

A lackluster June jobs report suggests the Fed’s aggressive fight against inflation may finally be working, which could influence future rate hikes.

July 7, 2023
3 minutes

Key points:

  • Only 209,000 jobs were added to the U.S. economy in June, the lowest number in two and a half years.
  • NAR’s Lawrence Yun said the Fed should now be focused on reducing rates and giving homebuyers some relief.
  • Housing analyst Jonathan Miller said the economy will either need a period of stability or a full-on recession before the inventory shortage is solved.

What does the latest jobs report mean for the housing market? And is that recession we've long heard about finally about to hit the economy?

The June jobs numbers were much lower than previous months, with just 209,000 jobs added to the U.S. economy. The numbers were below expectations and represented the slowest month for job creation since December 2020 when the pandemic was still in full effect. 

Although the Federal Reserve paused interest rate hikes in June, it previously increased rates ten times in a row in an effort to slow the economy and tamp down inflation. The new jobs report suggests the Fed's actions may finally be making an impact. 

The jobs data, said NAR Chief Economist Lawrence, is a sign that the Fed should continue to pause rate hikes. 

"The weaker job market combined with decelerating wage growth and calming consumer price inflation are clear indications for the Federal Reserve to stop raising interest rates," said Yun. Instead, he said, "more effort should be directed toward raising the housing supply by focusing on worker training in homebuilding and lessening barriers to construction so that once interest rates decline, there will not be a resurgence of rapid home price growth."

Whether the Fed feels the same way is yet to be seen. After its June meeting, Fed Chair Jerome Powell suggested additional interest rate hikes may be coming, which could lead mortgage rates to rise further. The average mortgage rate this week was the highest seen so far this year.

Bright MLS Chief Economist Dr. Lisa Sturtevant said that while the jobs report "does not provide a clear indication as to what the Federal Reserve will do at its next meeting," she thinks a rate hike is still likely. "The modest slowdown in the labor market could give the Fed renewed confidence in its ability to bring the economy in for a soft landing."

Jonathan Miller, CEO of the real estate appraisal and consulting firm Miller Samuel, told Real Estate News that the housing market won't see any meaningful growth in inventory until there has been a period of relative stability with mortgage rates. But that would require either a steady few months without new rate hikes, or a rate reduction — and Miller doesn't see that happening anytime soon. 

"A rate cut in 2023 seems wildly unrealistic because how can you cut rates when unemployment is at 3.5%? It's just not logical," he said. 

If the economy enters a full-blown recession, that could create a short-term boom in inventory, Miller noted, but economists and experts have been highly divided on whether the country is heading toward a recession or if we've already seen the bottom.

"You're hearing people say that a recession is six months out, but they've been saying that for two years," he said. "So what's different now?"

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