The outlook for nonbanking jobs has become somewhat more optimistic this spring, but overall employment growth over the past month has been slightly stronger than expected, raising questions about the outlook for mortgage lending.
Combined, independent mortgage bankers and brokers increased employment to 271,500 in May, up from a downwardly revised 268,600 in the previous month, according to the Bureau of Labor Statistics. In June, which had a shorter lag, employment numbers rose by 206,000.
The overall employment data, taken in isolation, could put upward pressure on interest rates and impact mortgage sales, but when combined with other indicators, the outlook for mortgage rates becomes unclear.
“Beyond this headline, other aspects of the data point to a slowdown in the job market,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said in a press statement.
Overall, the BLS report's readings are mixed, as the headline unemployment rate, a key indicator of mortgage performance, was slightly higher at 4.1 percent, Mortgage Capital Trading said in a commentary published Friday.
“Economists had been expecting 200,000 job gains in June, but the report came in at 206,000, well down from the 272,000 in May,” said Cody Echols, senior capital markets technical adviser at MCT. “The unemployment rate was expected to remain at 4%.”
And if inflation measures weaken further, that could outweigh the recent employment gains.
“Data pointing to a further decline in inflation over the coming months would be the most significant evidence that the Fed will need to cut rates in September,” Fratantoni said.
Other experts also suggest paying attention to political developments that affect interest rates.
“This is certainly an election the market will have to pay close attention to,” Melissa Cohn, regional vice president at William LaVais Mortgage, said in an email.