Job creation in May exceeded expectations, reinforcing the perception: United States Federal Reserve It will maintain the same benchmark interest rate at its June meeting and may delay any rate cuts planned for this year. That means mortgage rates could remain in place for longer than previously expected.
The U.S. economy added 272,000 jobs in May, higher than the market consensus of 180,000. That’s also well above the 160,000 jobs delivered last month (April data was revised downward by 15,000) and the 12-month average of 232,000, according to data released on Friday. U.S. Bureau of Labor Statistics.
In May, employment growth was most significant in industries such as health care (+68,000), government (+43,000), and leisure and hospitality (+42,000). Data show that the average hourly wage of private sector employees increased by 0.4% from the previous month to $34.91, an increase of 4.1% from the same period last year.
Meanwhile, the unemployment rate in May was 4% (6.6 million people), compared with 3.7% (6.1 million people) in the same month last year. This is the highest level of unemployment since January 2022.
Following the jobs report, the 10-year Treasury note rate, which is historically tied to mortgage rates, was at 4.42% on Friday morning, up 13 basis points since the open. exist house lineAccording to the Mortgage Rate Center, the 30-year fixed rate on a conforming loan is 7.2%.
The CME FedWatch tool, which measures the likelihood that the Fed will change the federal target rate at its upcoming meeting, showed on Friday that there was a 99.4% chance that rates would be kept unchanged at the next meeting, compared with 96.2% yesterday. During the same period, the probability of a rate cut in September dropped from 68.7% to 54.4%.
“While this report is not uniformly strong, overall it shows that the job market remains quite tight, which may mean that the Fed will continue to maintain interest rates at current levels as inflation is unlikely to fall back to lows given wage growth. speed,” said Mike Fratantoni, the company’s chief economist. Mortgage Bankers Association (MBA) said in a statement.
MBA predicts that the Federal Reserve will cut interest rates for the first time in September this year. The current base interest rate ranges from 5.25% to 5.50%.
Lawrence Yun, President national association of realtors (NAR) said annual wage growth of 4.1% is substantial and better than consumer price inflation of 3.4%. But Americans have not shown recognition of the improving economy “as cumulative consumer price increases remain higher than cumulative wage increases over the past four years.”
“Wage data is considered more reliable than household survey data. That’s why Wall Street expects the Fed to further delay cutting interest rates. Mortgage rates look set to remain near the 7% average for at least another month,” Yun said in a statement. stated in a statement.
Danielle Hale Chief Economist real estate agent networkIt said the increase in new jobs this month was “less than the hiring boom in March 2024 and December 2023.” Overall, the job market “has slowed from previous highs but appears to be normalizing in a healthy way that should help bolster confidence that monetary policy is having its intended effect.”
But inflation data is needed to understand the Fed’s next steps.
“Bond traders are expecting slower economic growth and lower inflation, which sent the 10-year Treasury yield last week to its lowest level since late March,” Hale wrote. “If that view holds true in next week’s data Confirmed, we may see mortgage rates remain below 7%, the threshold they have been hovering above and below for the past four weeks, but if the data deviates from this trend, mortgage rates could fall.
during an interview house line Earlier this week, Fannie Mae Chief Economist Doug Duncan said his team expects new payroll jobs in May to be consistent with April. But he noted that if the number exceeds 200,000 jobs, “it will take longer for the Fed to act.”
“Our forecast includes [the Fed] The September and December meetings saw interest rate cuts of 25 basis points each. But if they don’t get a strong trend in the three-month primary data in the direction they want, we’ll take out the September data. Current risks are balanced by reduced cuts.
