Any concerns about a slowing economy should be allayed for now. Employment grew substantially in September, per the latest release from the U.S. Bureau of Labor Statistics.
The U.S. economy added 254,000 new payrolls over the past month—more than 100,000 higher than in August (where 142,000 jobs were added). The September growth results are much higher than expected; beforehand, economists and journalists had been projecting roughly 150,000 jobs added. The results are also notably higher than the average monthly gain (203,000) seen over the past year.
The unemployment rate in September was also 4.1%—or 6.8 million people unemployed in total—negligibly lower than the projected rate of 4.2%, which was also the unemployment rate in August. This rate was expected to be unchanged in the September report.
Employment increased across a wide swath of industries, including hospitality (up 78%), healthcare (71.7%), government (31%) and construction (25%). Employment was down in manufacturing (7%) and transportation (8.6%).
However, there are worrying signs: long-term unemployment showed little change month-to-month and increased from 1.3 million to 1.6 million year-over-year.
Dr. Lisa Sturtevant, chief economist of Bright MLS, noted these concerning statistics while speculating how employer behavior could ripple into the housing market:
“As the balance in the labor market shifts from workers to employers, we may see more employees being called back into the office. Amazon announced its return-to-the-office policy last month, and it is likely that more companies will follow suit. There could be less housing demand and falling home prices in far-flung housing markets that boomed during the pandemic. Local markets closer to large employment centers could see an increase in demand if more workers are required to be at the office five days a week.”
This past September, the Federal Reserve cut interest rates by 50 basis points, its first cut since 2020. The reduction was spurred by inflation trending down toward the Fed’s overall goal of 2%.
The previous summer job reports had created concern of a labor market slowdown, with particular fears that September’s report would confirm this slowdown to be reality. Instead, the results showed an outright reverse of that slowdown. The latest data could make it less likely that the Fed enacts a larger interest rate cut at its next meeting in November, as the big increase in jobs suggests the economy is experiencing healthy growth without the need for a boost via slashing interest rates.
What do the results of the labor market mean for the near-term real estate market? Realtor.com® Chief Economist Danielle Hale said housing activity is and has been “weak.” Hale explained:
“Although mortgage rates have relented substantially, they bounced back somewhat this week as investors and the Fed disagree somewhat on the likely course for near-term policy. I expect to see markets shift closer to the Fed’s forecast in light of today’s data. This could put modest upward pressure on interest rates, including mortgage rates. Still, the drop-to-date in mortgage rates has boosted buying power substantially from recent lows, but many consumers appear to be waiting for more—an understandable approach when home prices continue to be near record highs.”
Sturtevant projects that, despite the recent bounce, mortgage rates will remain around 6% through the end of 2024.
“Current homeowners appear to be very sensitive to even small movements in mortgage rates,” said Sturtevant. “There is still significant pent-up demand for homeownership in the market, though some buyers may be waiting for rates to come down further this fall.”
While Hale notes that the housing market is also in an expected seasonal slowdown, data from Realtor.com points to higher selling activity in September.
“As falling mortgage rates chisel away at the bind that locked-in homeowners feel, they could usher in an uptick in both supply and demand, as many unlocked homeowner sellers are likely to choose to buy a new home.”
For more information on the latest employment data, click here.
