Even though jobs were added in the month of May, job growth was not as strong as it was expected to be.
However, this could end up helping many home buyers.
Only 38,000 jobs were added in the month of May. This is far below the projected increase of as large as 219,000 new jobs, and it is the month with the lowest job growth in over 36 months.
Job growth has been steadily increasing in recent months, but April fell flat of expectation. After May also came up short, investors may begin to lose confidence in the strength of the economy.
While there were positive portions of the report, it shows an overall decline in the pace of growth of the economy. While the economy is not shrinking, it isn’t growing at the pace that is expected or desired by investors.
Investors will likely make a “flight to safety” in response to the weak numbers reported.
This should be good news for mortgage rate shoppers as a flight to safety will lead to a decrease in mortgage rates.
Mortgage rates have already been low for most of 2016, and a decrease in rates could lead to new record lows. This coincides with summer, the busiest season for home buying. There are signs of more homes being available on the market, so it could be easier, and more affordable, to buy a home today than it was just a few months ago.
Home shoppers who want to take advantage of low rates could speed up the process by getting pre-qualified for a home loan.
Non-Farm Payrolls Explained
Non-farm payrolls are measurements of the number of jobs in the economy that are not farming. Each month, a survey of changes in non-farm payrolls is taken to see how quickly the economy is growing.
The importance of non-farm payrolls that it is a fairly comprehensive measure of how well the economy is doing. If the economy is not doing well, there will be a poor month in payrolls. Similarly, a strong economy would lead to a strong month in payrolls.
May’s payrolls added were sharply lower than those in April. April saw 123,000 jobs added to the economy, significantly higher than last month’s 38,000 jobs added.
However, the numbers were a bit skewed by a major strike that removed 37,000 jobs from the economy temporarily. Those jobs have since been added back, but were added too late to be reflected in May’s report.
While the total number of jobs added last month shrank, the unemployment rate shrank as well. The unemployment rate in the United States now rests at 4.7%, it’s lowest level in well over 60 months.
The overall takeaway from the non-farm payrolls report is that the economy is not growing, but it isn’t shrinking either. Signs point to June being a bounce-back month, and that could mean rising mortgage rates at the end of the month.
While present rates are low, future rates will be determined at the Fed’s meeting on June 13.
How Payrolls Affect Mortgage Rates
While the number of jobs in the economy doesn’t directly affect mortgage rates, they will likely have a big impact on rates moving forward.
The Fed is going to meet in near future to determine whether or not to increase interest rates. If they decide to increase rates, it will show that they have a positive outlook on the economy. An increase in interest rates will lead to an increase in mortgage rates.
However, a weak month in job growth could deter the Fed from raising rates. If this is the case, mortgage rates will not only stay low, but they could sink even lower in response.
For home buyers, this is good news. Low rates could persist throughout summer, the busiest season for home buying. Low rates make homes more affordable and make homeownership more easily achievable.
For current homeowners, low rates could mean saving a ton on a refinance.
Rates are likely to dip in the short run in response to weak payroll data. If you are looking to buy a new home or refinance on a current home, consider checking what rates are available to you in your area.
Today’s Mortgage Rates
Mortgage rates have been consistently low for the past three months. While a Fed rate hike could increase mortgage rates, a decision to keep the Fed rate the same would likely lower mortgage rates.
Rates will change daily leading up to the Fed’s meeting on June 13, and they could change dramatically immediately after the Fed’s meeting.