While there was a decent amount of job growth in the month of August, it may not be enough to push mortgage rates higher.
On the contrary, mortgage rates could actually decrease in response to recent job growth reports.
August saw 151,000 jobs added to the economy. While the number of jobs added is sizable and encouraging, it is well below July’s growth of 275,000 as well as what early projections indicated.
Still, a large, positive number of jobs added to the economy is a good sign. The Federal Open Market Committee is scheduled to meet later in the month, and the numbers could be enough to sway them toward increasing the Fed rate later in the year.
However, the chances of a rate hike occurring this month are dwindling. There hasn’t been enough strong growth to convince the Fed to increase rates.
Fortunately for home buyers, this could mean low rates moving forward.
About Non-Farm Payrolls
Each month, a survey of non-farming jobs is conducted. The data, presented the next month in the non-farm payroll report, is one of the best indicators of economic strength.
Because jobs will only be added to an economy that’s growing, non-farm payrolls are often used to predict changes coming to the housing market.
The more jobs there are, the more people there are making money. The more money made, the more likely homes are going to be bought.
While there were a decent number of jobs added, wage growth was relatively flat, growing at just 0.1% during the month of August. In comparison, July’s strong growth saw a 0.3% wage growth. While there is still growth in wage rates, the Fed would like to see better growth before committing to a rate hike.
The number of jobs added in August were also much fewer than in both July and June, ending a nice string of sizable growth.
Despite weaker-than-expected numbers, August was still a strong month. The number of jobs added were good, average earnings increased and the unemployment rate is still resting below five percent.
How Do Payrolls Affect Mortgages?
Because payrolls are one of the best indicators for economic growth, they tend to affect the mortgage industry in a number of ways.
The biggest effect caused by August’s payrolls report will come from the Fed. Because numbers were weaker than expected, the Fed is less likely to increase the Fed rate during their meeting later this month.
For home buyers, this means that mortgage rates will likely stay low, and possibly even dip down to lower levels.
Mortgage rates tend to increase when the economy is strong. Because the economy was not as strong as expected in August, it could lead to a drop in rates.
Also, rates are not likely to increase to high levels leading up to the Fed’s meeting. Investors will want to hear what the Fed has to say before making any market-shaking moves. The most likely scenario moving forward is that rates will hold near their current levels.
This should be welcoming news for home buyers and refinancers. Rates have been near record-low levels for the past few months, and they’re unlikely to increase until the Fed decides to raise their rates.
With the summer season coming to an end, the shortage of homes could also be ending. This, coupled with low rates, sets up September to be another excellent month for the housing market and home buyers.
Today’s Mortgage Rates
Mortgage rates change every day, and any news can affect them. Even though rates have been low, there is a chance that they are getting higher or lower each day.