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A stronger than expected September jobs report is not great news for the Federal Reserve or the housing industry, which was hoping for a swift decline in interest rates.
Data from the U.S. Bureau of Labor Statistics released on Friday shows that 254,000 non-farm payroll jobs were added in September. This is higher than the average monthly gain of 203,000 jobs over the past 12 months. Additionally, jobs data for the prior two months were revised upwards by 72,000 jobs.
Also causing economists to pause was wage growth, which reaccelerated to 4.0% in September.
“All of these signs point toward a successful ‘soft landing,’ but also stoke worries that inflation may not move in a straight line to the Fed’s 2% target,” Mike Fratantoni, the MBA’s senior vice president and chief economist, said in a statement. “This report could certainly slow the expected pace of rate cuts.”
Despite strong job growth, unemployment remained steady, dropping just 0.1 percentage point month over month to 4.1%, with 6.8 million people unemployed. A year ago, the jobless rate was 3.8% and 6.3 million people were unemployed.
Most of the job gains in September occurred in food services and drinking places (+69,000 jobs), health care (+45,000 jobs), government (+31,000 jobs), social assistance (+27,000 jobs), and construction (+25,000 jobs).
Over the past 12 months the construction sector has averaged a gain of 19,000 jobs per month. Residential construction added 2,000 jobs from a month prior and an additional 5,800 residential specialty trade contractors entered the work force. The sector’s largest source of monthly gains, however, was in nonresidential specialty trade contractors, which gained 17,000 jobs in September.
Real estate also recorded a month-over-month increase in jobs, gaining 2,100 jobs in September.
While September’s jobs report may cause the Fed to reevaluate just how quickly they want to cut interest rates, economists believe the economy and inflation are still cooling off.
“There are mixed signals in the economy. Job seekers are having a harder time finding work, as the hiring rate has ticked down. The number of long-term unemployed—that is, people unemployed for six months or more—has been on the rise,” Lisa Sturtevant, Bright MLS’ chief economist, said in a statement. “And consumer confidence fell sharply in September, with more people saying they are worried about the job market.”
Sturtevant thinks this confidence will drive the housing market forward in this fourth quarter of the year.
“Mortgage rates will likely remain around 6% for the rest of the year, which should bring both more buyers and more sellers into the market,” Sturtevant said. “But if there are growing concerns about the economy, that could provide headwinds to the housing market.”
