While it wasn’t as strong as early forecasts predicted, job growth in September still showed signs of strength in the economy.
The positive numbers could play a role in determining when the Fed is going to increase their rate. An increase could come as soon as the first week of November.
According to the non-farm payrolls report, 156,000 jobs were added in the month of September. This is lower than job growth in any of the past four months, but job gains of over that span have been impressive.
Even still, the 156,000 jobs added fell short of expectations. Early polls indicated that about 175,000 jobs would be added in September. Labor is growing at a quick pace, but it isn’t growing as quickly as it is expected to.
Along with the labor growth, unemployment came in at five percent. Unemployment hasn’t been changing much over the past year, but the consistency can actually be seen as a sign of growth and strength.
Early signs from the Fed in response to job growth is mixed. The Fed wants to see consistency in the market before deciding to increase their rate, and September’s lower-than-expected growth may not be enough to convince them.
Until the Fed meets again in November, the labor growth could affect mortgage rates over the next few weeks.
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. The non-farm payroll report is one of the best indicators for economic strength.
Job growth, and more specifically consistent job growth, is a sign of an economy that’s growing. Any major changes in the economy are bound to affect the housing market as well.
There were 156,000 jobs added in September. While the number is strong, it is lower than August’s 167,000 jobs and July’s 252,000 jobs. As we approach the busier winter employment season, we could begin to see higher job growth numbers.
One encouraging sign from the job report is the rate of wage growth. According to the report, hourly wages have risen 2.6 percent over the past year, showing that the rate of wage growth is beginning to pick up.
Wage growth may be more important than the number of jobs added. The higher the wage growth, the more people will be making, on average, in the workplace. The more people make, the stronger the economy is going to become.
The Fed will likely be encouraged by strong wage growth, and this could translate into their decision to raise rates.
How Do Payrolls Affect Mortgages?
Non-farm payrolls are an excellent representation of economic growth. Generally speaking, the stronger the economy, the stronger the housing market.
While September’s report proved that the economy is still growing, the growth wasn’t as high as many wanted to see it. This could help home buyers.
Mortgage rates have been holding at low levels for the majority of the past three months. The main factor that has been keeping them low is the low federal funds rate, a rate set by the Fed. If the Fed decides to increase their rate, mortgage rates are bound to increase.
The Fed is planning on increasing their rate once before the end of the year. This will either happen during their November meeting early next month or during their December meeting.
If there is no rate hike in November, a rate hike is all but guaranteed for December.
Home buyers and mortgage rate shoppers can take advantage of this information to get the most out of low rates. Rates are near their lowest levels of the past 39 months, so it seems unlikely that they’ll drop much lower.
However, current rates are still ultra-low. If the Fed decides not to increase rates in November, mortgage rates will likely begin to slowly increase through the remainder of the year.
Those looking for the lowest rates may not have to wait at all. It’s beginning to look like rates in October are going to hold near their current levels.