Jobs in the construction sector led the overall jobs market according to data for February jobs released by the Bureau of Labor Statistics. While the total nonfarm payroll employment increased by 313,000, the unemployment rate remained unchanged at 4.1 percent, with jobs in construction, retail trade, professional and business services, manufacturing, financial activities, and mining seeing increases in their labor force.
According to the data, construction employment added 61,000 jobs during the month, rising to its highest since 2008. It also saw the biggest one-month jump since 2010. Do these numbers indicate lower mortgage rates? Not necessarily, according to economists who track the housing market.
“For the Federal Reserve, the report should help soothe concerns over an overheating economy and still makes last December’s dot plot, which implies three rate hikes this year, look reasonable,” said Doug Duncan, Chief Economist at Fannie Mae.
Explaining the correlation between an increase in wages and the mortgage rates, Mark Fleming, Chief Economist at First American said, “While increasing mortgage rates make the monthly burden of financing a home purchase more expensive, today, the reason mortgage rates are rising is because wages are growing very consistently and the labor force participation rate is on the rise – the labor market continues to tighten.”
According to Tendayi Kapfidze, Chief Economist at LendingTree, “The increase in rates that occurred in February was driven in part by concerns about inflation following January’s strong wage growth. This report suggests that mortgage rates should consolidate around current levels as the upward pressure abates.”
The increase in jobs has also had a positive effect on home equity. “New jobs drive future economic and housing growth by boosting total consumer spending power. In fact, strength in these fundamentals just pushed homeowner equity to its highest level ever—$14.4 trillion—in the 4th quarter,” said Danielle Hale, Chief Economist at Realtor.com.
While these numbers indicate that the housing market should bounce back from a dismal January, they’re still a long way from alleviating concerns about home prices that have been rising consistently, not the least because of tight inventory.
“Hourly earnings were a slight disappointment this month, moving higher, but at a slower year over year pace than we saw last month,” Hale said. “Especially when you consider listing prices are up 10 percent from a year ago, it doesn’t look like higher wages are going to be a panacea for home buyers anytime soon.”