January Jobs Report Exceeds Expectations

In what is usually a down time in the employment sector, January 2024 reversed course and rose in a big way, as the Bureau of Labor Statistics (BLS) reported that employment rose by 353,000 jobs in January 2024, and the unemployment rate remained at 3.7% nationwide.

The BLS found job gains occurring in professional and business services, healthcare, retail trade, and social assistance, while employment declined in the mining, quarrying, and oil and gas extraction industries.

“According to this morning’s jobs report from the Bureau of Labor Statistics, the labor market continues to grow at a robust pace, with 353,000 jobs added in January,” said Mark Palim, Deputy Chief Economist at Fannie Mae. “This is a slight acceleration from December’s upwardly revised pace of 333,000, and continues to indicate a healthy labor market. Most major sectors experienced job gains. In particular, the private education and health services sector added 112,000 jobs in January, the professional and business services sector added 74,000 jobs, and the retail trade sector added 45,200 jobs. With the introduction of annual benchmark revisions to past data, the level of payroll employment at the end of 2023 is now 115,000 higher than was previously reported, indicating that our view of the labor market is even more positive than we had previously believed.

January marked the third consecutive month where the unemployment rate stood at 3.7%, with the number of unemployed people having changed little at 6.1 million.

“The January jobs report showed that companies added workers to payrolls at a robust pace of 353,000, well above the 255,000 monthly average for 2023, which was higher due to upward revisions in November and December figures,” said Realtor.com Chief Economist Danielle Hale. “Despite the strong job gains, unemployment was steady at 3.7%, marking a still-healthy environment for workers. Job gains were widespread, in professional and business services, healthcare, retail trade, and social assistance.”

Things moving forward may continue to look upward for the job market as for the fourth consecutive meeting earlier this week, the Federal Reserve’s Federal Open Market Committee (FOMC) made the call that their best course of action was to do nothing with interest rates, holding rates steady at 5.50%. The most aggressive series of rate hikes in history ended in June when the committee held off on raising rates due to a litany of positive factors which consisted of 11 straight rate hikes over 15 months. Since the post-pandemic rate hikes began, the FOMC raised rates in March 2022 (+25 points), May 2022 (+50 points), June 2022 (+75 points), August 2022 (+75 points), September (+75 points), November 2022 (+75 points), December 2022 (+50 points), February 2023 (+50 points), March 2023 (+25 points), May 2023 (+25 points), June 2023 (+0 points), July (+25 points), September (+0 points), November (+0 points), December (+0 points), and January (+0). This is equivalent to a rise of 5.00 percentage points in under two years. The FOMC next convenes for its first meeting of 2024 on March 19-20, 2024.

“A single data point should not change the direction of policy. However, we expect that the balance of incoming data will keep the Federal Reserve from cutting rates in March, and still anticipate that they will wait until the May meeting for a first cut,” added Mortgage Bankers Association (MBA) SVP and Chief Economist Mike Fratantoni. “This certainly will depend on continuing declines in inflation between now and then.”

Breaking down further the employment numbers, among the major worker groups, the unemployment rates for adult men (3.6%), adult women (3.2%), teenagers (10.6%), Whites (3.4%), Blacks (5.3 %), Asians (2.9%), and Hispanics (5%) showed little or no change in January.

The labor force participation rate, at 62.5%, was unchanged in January, and the employment population ratio, at 60.2%, was little changed. These measures showed little or no change over the year.

“The strong job market is good news for the spring buying season as higher household incomes are a necessary component, but it also means that mortgage rates are not likely to drop much further at this point,” noted Fratantoni.

Freddie Mac reported the 30-year fixed-rate mortgage (FRM) at 6.63% as of February 1, 2024, down from last week when it averaged 6.69%. A year ago at this time, the 30-year FRM averaged 6.09%.

“Speaking of housing, residential building construction employment was up 0.3% year-over-year in January, while non-residential was up by 0.2%,” said First American Economist Ksenia Potapov. “Compared with pre-pandemic levels, residential building employment is up 12.3%, while non-residential building is up 6.3%.”

And that boost in residential building construction employment is a good sign for the nation’s housing inventory, as builder confidence in the market for newly-built, single-family homes climbed seven points to 44 in January, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

“Mortgage rates have decreased by more than 110 basis points since late October per Freddie Mac, lifting the future sales expectation component in the HMI into positive territory for the first time since August,” said NAHB Chief Economist Robert Dietz. “As home building expands in 2024, the market will see growing supply-side challenges in the form of higher prices and/or shortages of lumber, lots and labor.”

Potapov added, “If inflation continues to decelerate, the Fed may well cut rates three times this year, which would still keep monetary policy in restrictive territory. If the Fed goes ahead with its planned cuts, mortgage rates are likely to remain near 6%, which should help the nascent housing market recovery.”

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Eric C. Peck

Eric C. Peck has 25-plus years’ experience covering the mortgage industry, most recently serving as Editor-in-Chief for National Mortgage Professional Magazine. He graduated from the New York Institute of Technology, where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books, and has served as Copy Editor for Entrepreneur.com.
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