Mediocre jobs data is no cause for alarm — or celebration
Job growth was far more sluggish than expected in June — but probably not enough to panic a Federal Reserve that remains concerned about rising inflation.
Key points:
- The U.S. economy added 57,000 jobs in June, according to the BLS, which also revised its April and May numbers downward.
- Though the latest labor market data could lower the chance of short-term interest rate hikes, the Federal Reserve may also remain reluctant to lower rates until inflation cools.
- With inventory starting to shrink, the housing market appears to be transitioning into a seasonally slower time of year following a lackluster spring.
The underwhelming June jobs report released today doesn't appear to be raising any immediate red flags and likely won't have much impact on mortgage rates in the short term.
Less labor market growth than expected
The U.S. economy added an estimated 57,000 jobs in June, far below what forecasters predicted. The U.S. Bureau of Labor Statistics (BLS) also revised down its April and May numbers, putting the three-month moving average at about 110,000. That steady amount likely won't raise concerns for a Federal Reserve that has been focused on lowering inflation.
Despite last month's sluggish job growth, the unemployment rate ticked down from 4.3% in May to 4.2%, a decline mostly attributable to a shrinking labor force. Wage growth, which was also subdued with a year-over-year rise of 3.5%, is still outpaced by inflation, which hit a three-year high of 4.2% in May.
The latest jobs data "keeps the floor in place, but does not create a springboard" for housing, said Sam Williamson, senior economist at First American. "Positive job growth still supports incomes and buyer confidence, but weaker participation and uneven sector gains do not point to the kind of labor-market momentum that would quickly unlock demand."
For the most part, the labor market isn't providing housing with either a headwind or a tailwind, said Jake Krimmel, senior economist at Realtor.com. However, job growth continuity "is no small thing," Krimmel said, "especially against the volatile backdrop of rates, inflation, and uncertainty we saw earlier this spring."
Data suggests a sluggish construction market
The June BLS report did contain some bad signals for housing in its construction industry data. Residential construction was down 8,600 jobs in June, the National Association of Home Builders (NAHB) observed, and the overall construction industry's unemployment rate climbed from 3.7% in April to 6.2% in June.
"The continued increase suggests softness in construction labor market conditions," NAHB Senior Director of Forecasting and Analysis Jing Fu wrote in a July 2 blog post.
Little movement in rates
The 30-year fixed-rate mortgage stayed in a narrow range over the past week, providing some stability for potential homebuyers even while remaining elevated. The 30-year rate averaged 6.43% this week, according to Freddie Mac, little changed from a month ago when it hovered around 6.48%.
Rates have bounced around a bit over the past two days, according to Mortgage News Daily (MND), which uses a different set of metrics in gauging rates. The 30-year rate dropped after the June jobs report was released, MND reported, and averaged 6.6% heading into the Fourth of July holiday weekend.
Mortgage application data has also been subdued. Purchase applications were up just 1% compared to one week earlier, according to the Mortgage Bankers Association, while refinance applications fell slightly week-over-week.
With the spring homebuying season now in the rearview mirror, inventory continues to trend downward. Active listings fell 0.1% week-over-week, according to Redfin's rolling four-week report, and pending sales have risen about 2% compared to this time last year.