There were 138,000 jobs added to the economy in May, lower than the expected 185,000 jobs leading up to the data being released.
However, the number of jobs added is still enough to essentially guarantee a rate hike from the Fed in a few weeks.
Last month, the increase in jobs added to the economy forced unemployment even lower. Currently, the unemployment rate sits at 4.3%, the lowest level in 16 years.
There’s a lot to take away from May’s jobs report. The biggest takeaway is that the economy is continuing to grow and that rates will be increased sooner than later.
Any rate hike from the Fed would come on June 14 at the soonest. They are scheduled for a two-day meeting from June 13-14, and any rate hike would be their third in just two years.
As far as mortgage rates go, don’t expect rates to hold below four percent for much longer. Now that investors know that the Fed is likely to raise rates, there’s a good chance that mortgage rates will start to react to the news soon.
Rates could begin rising in anticipation of the Fed’s next rate hike as soon as today. Mortgage rates change every day, so there’s a chance that rates today are different from rates yesterday.
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.
May’s report wasn’t as impressive as many expected it to be, but that doesn’t mean it was a negative report.
Because the economy still added a high number of jobs, the unemployment rate was pushed to its lowest level since 2001.
While the number of jobs added isn’t the only factor that goes into measuring unemployment, it’s the best indicators to show that the economy is growing.
Another promising sign was that the hourly wage change rose by 0.2% month over month. This means that wages are on pace to grow by an average of 2.5% throughout the year, well above the average inflation rate.
The only negative statistic from the jobs report is that the participation level dropped from 62.9% to 62.7%. This could be for a number of reasons, but it does show that some people who are interested in finding full time work haven’t found a position yet.
Even with that negative statistic, this report essentially sets up the Fed to raise their rates in two weeks.
How Do Payrolls Affect Mortgages?
Mortgage rates are practically guaranteed to rise after this jobs report.
The economy might be reaching full employment, and that means that the Fed can safely raise their federal funds rate to help the economy sustain its growth.
The Fed’s rate is the benchmark for all other types of interest rate – one of those is mortgage rates.
When the Fed does raise their rate again, which is likely going to be in two weeks, then there will be a new “minimum” level that all types of rates can reach. Mortgage rates will be forced slightly higher, and the chance of them going any lower will decrease.
Lately, home buyers have been enjoying a few weeks with the average rate coming in below four percent. It was the first time this year that it had happened, but this recent report could easily end that streak.
Even if the Fed decides not to raise their rate, there is too much positive news to ignore. Mortgage rate shoppers might want to lock in on rates now before they begin to rise.
Mortgage rates change every day, and the jobs report is a factor that leads to changing mortgage rates.
Currently, rates are moving based on the information that investors have been given. They will continue to change until other news is released.