After last month’s shockingly low jobs report, many speculated on what that would mean for both the economy and the mortgage rates.
Experts at Goldman Sachs predicted that the number was only an outlier, and that it didn’t line up with the direction of the rest of the economy.
As it turns out, they were right. The jobs number came in today much higher than anyone expected.
Yesterday, ADP predicted jobs to shoot up again with an increase of 172,000.
The total nonfarm employment increased by 287,000 in June, according to a report from Bureau of Labor Statistics.
A month-over-month increase this high has only happened twice in the last 10 years, according to CNBC.
Job growth occurred in leisure and hospitality, health care and social assistance, and financial activities, according to the report. Employment also increased in information, mostly reflecting the return of workers from the Verizon strike.
“June’s job growth represents a spectacular rebound,” said Lawrence Yun, National Association of Realtors chief economist. “It’s also comforting in terms of consistency on a year-over-year basis, despite some monthly swings, with around 2.5 million net new job additions over the latest 12 months. Further, dynamism is rising with more gross hiring and more people switching to different employers.”
“This trend is showing up in wages, the best year-over-year rise in many years,” Yun said. “The stronger job market means mortgage rates will likely rise a bit from historic lows.”
“The only concern is still sluggish employment rate at under 60% of adults, compared to 63% before the recession,” he said. “All in all, good news for home sales and increased demand for commercial spaces.”
The Federal Reserve’s minutes from the June meeting showed officials held off on raising mortgage rates in June due to the uncertainties surrounding the U.S. labor market.
This new jobs number could push the Fed to raise mortgage interest rates, despite the U.K.’s recent decision to leave the European Union.
“The 287,000 surge in nonfarm payrolls in June suggests that the sharp slowdown in the preceding months was nothing more than a blip,” Capital Economics Assistant Economist Andrew Hunter said in response to the report. “Fed officials will want to see evidence of a more sustained recovery in employment growth over July and August as well, but this nonetheless supports our view that the next hike could still be in September.”
Not everyone, however, welcomed the report as good news.
"The big June employment report has a lot of warts,” Redfin Chief Economist Nela Richardson said. “May's number was revised down, 203,000 more people lost jobs, African-American unemployment is still high and wages have barely moved.”
"None of that will affect the housing market this year, but the job market's stubborn refusal to heal makes it a lot harder for the economy to create future homebuyers," Richardson said.
And Richardson wasn’t the only one to point out the flaws in the report.
“The June jobs report was perhaps the only one in recent memory where economists were just as, if not more, interested in the previous month’s revisions than the current month’s estimates,” Trulia Chief Economist Ralph McLaughlin said. “As it turns out, May was indeed a bad month, but June numbers ushered in relief that the U.S. labor market is doing well in a maturing economic cycle.”
“Although the rate of year-over-year job growth appears to be flattening, the short-run impact on housing is likely to be negligible,” McLaughlin said. “Not only is tight inventory keeping prices buoyed in many markets, growth in residential construction employment is outpacing total job growth by a factor of two.”