Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Payrolls rose more than expected last month. That's great for those who found jobs in November, but not the best news for the housing market and borrowing rates. We'll tell you why in today's Line.
Employment Rises by 199,000 in November, Unemployment Down to 3.7%
The Dow Jones forecast was looking for 190,000 jobs and a 3.9% unemployment rate, so this is a better-than-expected report. Here’s some more highlights:
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Part of the increase in employment last month can be attributed to the end of auto strikes.
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Job gains were led by health care (+77,000) and government (+49,000).
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Data for September and October was revised downward by just 35,000—a very small revision.
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Wages rose 0.4% in November and are 4% higher than a year ago. While the annual rate of wage growth has fallen for the past five months, prices have been falling at a faster clip, which helps the purchasing power of working Americans.
The labor market just has no quit in it. While it’s true job growth has been slowing—see the chart below—hiring remains much higher than anybody thought it would be at this point.
In other labor news, the number of job openings fell to its lowest level since March 2021. That may sound really bad, but it’s not. There are still 8.73 million available jobs out there, or 1.3 openings for each job seeker.
So overall, this is a very positive report on the labor market. But—and economists always have a “but”—this is not good news for rates, particularly mortgage rates. As I’ve mentioned before, any better-than-expected news on hiring or spending is bound to bring rates higher. Remember that long-term rates are based on future inflation expectations, which will go up when the economy is doing better than forecasted.
I don’t think this report is strong enough to push the Fed to hike rates next week, but it should be enough to stop all the recent talk of possible rate cuts. Let’s not get greedy, there’s an increasing chance the Fed will get its soft landing—which means bringing inflation down without causing a recession—so let’s not push it and start demanding rate cuts until inflation hits the Fed’s 2% target.
Spoiler alert: the strong jobs report will take some of the joy out of the next item.
Mortgage Rates Fall for the Sixth Straight Week
The average 30-year conforming mortgage rate fell to 7.03% this week, down from 7.22% the prior week. Rates have now declined each of the past six weeks, falling a total of 0.73% since hitting a 23-year high in mid-October.
To you buyers out there, keep your eye on rates. While the November jobs report is a bump in the road, rates are heading in the right direction. Inventory remains limited in most parts of the country, so prices aren’t coming down yet. That means lower rates are the best opportunity to make your purchase more affordable right now.
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