HousingWireHousingWire
Labor over inflation has been my mantra since late 2022. Today, the BLS jobs report showed that the labor market is getting softer, but it’s not breaking. This gives us a glimpse of what may happen over the next 10 months for mortgage rates, especially since, since Jan. 14, we’ve seen them move lower. However, there is a limit to the downside on mortgage rates until the labor market breaks, or we get more than 1% rate cuts from the Fed. Let’s put a framework for 2025 in play.
Total non-farm payroll employment rose by 151,000 in February. The unemployment rate barely changed at 4.1%, according to today’s report by the U.S. Bureau of Labor Statistics. Employment trended up in health care, financial activities, transportation and warehousing, and social assistance. Federal government employment declined.
My jobs growth forecast for 2025 is between 133,000 and 151,000 jobs. Currently, we have an average of 138,000 jobs created each month in 2025. In the coming months, we will see if the U.S. economy can withstand job losses in the government sector, reduced spending in the economy, and a housing market on the brink of losing residential construction projects. These factors would drive the unemployment rate above 4.3% — the line in the sand for the Fed.
Since government jobs were a significant contributor to job growth data last year, achieving similar results in 2025 will be challenging. It’s important to distinguish between federal workers and state and local government job hiring. However, with reduced economic spending, we expect government employment to be less of a growth factor in the employment data. This leads us back to the private sector and residential construction jobs. We didn’t observe any real growth in this category in the recent report, and the chart below illustrates how critical this sector is to the overall economic cycle.
Builders face stress from rising mortgage rates and the threat of higher lumber tariffs, leading to a significant decline in their confidence data.
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