Job growth over the past month exceeded expectations, continuing a trend of the economy growing quicker than expected.
For home buyers, this almost certainly means higher mortgage rates.
In the month of February, there were 235,000 jobs added, as well as a revised 238,000 jobs added in January. This coincided with other factors that prove that the labor market is growing at a healthy pace.
For example, the unemployment rate fell from January to February by 0.1%, a decent drop for a single month.
Also, the average hourly earnings for workers rose by 0.2% in February. If that continues throughout the year, then there would be an average wage growth of 2.4%, well above the current inflation rate.
All signs point to an economy that is growing and helping the people at the same time. The number of jobs is increasing, the number of workers is increasing and the amount people are getting paid is rising.
The only possible downside to such a positive report is the implications it will have on mortgage rates.
Normally, a positive economic report would have a minimal effect on rates. However, this report solidifies the Fed’s decision to raise their rate on Wednesday.
So, beginning Wednesday, rates will once again be higher.
About Non-Farm Payrolls
A survey of non-farming jobs is conducted each month to gauge the growth of the labor market. The data is presented the following month in the non-farm payroll report. Because employment is a central part of the economy, the non-farm payroll report is seen as one of the best economic indicators.
While the housing market and mortgage rates aren’t directly connected to the payroll report, they are bound to be affected by any large changes in the economy.
When a positive economic report comes out, much like last month’s jobs report, then it shows that the economy is doing well.
In fact, the economy is growing even quicker than expected. Coming into March, there was an expected 200,000 jobs added in the month of February. Upon review, it turned out that there were actually 235,000 jobs added.
The same goes for January. Originally, there were an expected 227,000 jobs added, but that has since been revised to 238,000.
The only potential issue to find is that there might not be enough people to fill jobs as quickly as jobs are being created.
Many parts of the economy are settling down after the first full month of having President Trump in office, and they’ve begun to continue their upward trend.
How Do Payrolls Affect Mortgages?
Normally, this type of report would have a small effect on mortgage rates.
However, this report locks in the Fed’s decision to raise their rates next week.
On Wednesday, the Fed will raise their rates for the first time this year and the second time in the past 12 months. This will mean higher rates for home buyers.
Also, many home buyers and lenders know that the Fed is going to raise their rates. This could begin to force mortgage rates higher as soon as today.
Those that are looking to purchase a home shouldn’t be too concerned about rising mortgage rates. Any changes to the rate shouldn’t be too quick. Also, rates rose over this past week, a sign that lenders are already preparing for a rate hike.
If anything, home buyers should remain confident in the economy and housing market. Mortgage rates may rise over the next week or so, but they could also begin to fall after that. They could even fall next week, depending on speculation.
The most important thing for mortgage rate shoppers to do is keep track of any changes to mortgage rates. Rates change every day, so rates today could easily be higher or lower than rates yesterday.