November’s job growth outpaced October, indicating that the economy is growing at a healthy pace and should continue to do so.
There were 178,000 jobs added in November, a sharp increase from just 142,000 in October. This also follows a revised addition of 208,000 jobs added in September.
The increase of jobs added is a sign that the economy is healthy. Jobs have been getting added at a fast clip throughout 2016, and more jobs should become available over the coming months.
Another encouraging statistic is the decrease in the unemployment rate. In November, the unemployment rate dropped from 4.9% to 4.6%. While some of this is due to a decreased level of workforce participation, it is also partially due to the increased number of jobs.
Regardless of why it fell, the unemployment rate is still well below levels from just a few years ago.
At this time in 2012, the unemployment rate was almost eight percent, one of the highest levels of the past four years. However, all indicators show that the economy has been improving over the past few years.
The only negative report from last month was the decrease in average hourly earnings, down 0.1%. This wasn’t expected, and it should be erased moving forward.
Overall, wage rates have been rising throughout the year, much like most of the economic indicators that show labor strength.
Unfortunately for some home buyers, this could potentially mean higher mortgage rates.
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-farms payroll report is seen as one of the best economic indicators.
While some may not be concerned about how many jobs were added last month, the results of the payroll report can influence mortgage rates.
Mortgage rate shoppers will want to pay attention to the number of added jobs. The more jobs added, the more people there are getting paid. The more people getting paid, the more likely people are to want to buy a home.
Also, the unemployment rate is now close to where the Fed wants to see it. This could mean that they’ll be more likely to make decisions that impact the mortgage world.
As with most indicators, November’s non-farms payroll report shows that the economy is doing well, and it should continue to grow at a normal pace for the foreseeable future.
How Do Payrolls Affect Mortgages?
There is no direct correlation between mortgage rates and the non-farms payroll report. However, because the payroll reports is a popular indicator, it will indirectly affect mortgage rates.
The strong economic conditions are likely going to force mortgage rates higher.
Rates are going to increase leading up to the Fed’s meeting in two weeks. The Fed has wanted to see strong economic conditions before raising their rate, and November’s payrolls report will only solidify their confidence in the market.
After the Fed raises their rate, mortgage rates will continue to rise as well.
Generally speaking, mortgage rates are going to increase whenever the economy is doing well or whenever there is confidence in the market.
For most of 2016, there wasn’t much confidence in the economy. Major events like the Brexit shook global markets, and investors flocked toward safer investment options in response.
One of the most popular “safe” investment options is the 10-year treasury note, and mortgage rates are tied to the 10-year note. The more 10-year notes purchased, the lower the rate.
As a result, this decreased mortgage rates. However, investors are moving away from the 10-year treasury note now that the economy is chugging. This is going to increase mortgage rates.
Rates have already been increasing ever since the Presidential Election, and there’s no sign of them going back to lower levels.
For those looking to get the best mortgage rates possible, it is best to lock in sooner rather than later. Barring any unexpected economic downturn, mortgage rates are going to rise throughout the next few months.