Mortgage Bankers Association (MBA) Chief Economist Mike Fratantoni offered his reaction to the U.S. Bureau of Labor Statistics report on employment conditions in June, along with some insight about what he believes it means for the financial marketplace.
“Job growth came in at 147,000 in June, in line with the average pace for the last 12 months,” Fratantoni said. “However, half of these job gains were in state and local government, leaving private sector job gains at 74,000, at half their pace of recent months. Looking within the private sector, effectively all these new jobs were in education, health care and hospitality. Recent data also show that job openings are up in these sectors.”
He pointed out that while the unemployment rate fell to 4.1 percent, this was more a reflection of employees leaving the labor force than a gain in employment. He explained this conclusion by noting the drop in the labor force participation rate reflected by the available data. Additionally, he noted the ongoing slowing in wage growth, which dropped in June to a 3.7 percent rate over the past 12 months.
“Taken together, these data indicate a job market that is holding up reasonably well given the uncertainties facing this economy,” Fratantoni said. “While there are certainly some signs of softening in the private sector, the report is likely to keep the Federal Reserve on hold for now. MBA is still forecasting two cuts from the Fed this year.”
Given the current state of the market, he said he expects potential homebuyers to “remain cautious unless, and until, the job market begins to improve again, or mortgage rates drop sufficiently to spur more activity.”
MBA’s latest Weekly Mortgage Applications Survey results indicated a 9.4 percent increase in applications the first full week of July, according to data assessed by the Market Composite Index, a measure of mortgage loan application volume.
This number was seasonally adjusted to account for the July 4 holiday. On an unadjusted basis, the Index decreased 13 percent compared to the week before.