With only days before the presidential election and with inflation on track to fully normalize, all eyes have been on the labor market, which for almost two years remained strong despite a historic rate-raising campaign by the Fed.
That strength has appeared more shaky, and this month’s report shows the most significant signs of weakness right as the Federal Reserve reverses course to begin cutting rates.
“Today’s jobs report is arguably one of the most important economic releases of the year,” said Lisa Sturtevant, Bright MLS chief economist, in a statement. “Unfortunately, it casts a murky shadow heading into next week.”
The release, which comes from the Bureau of Labor Statistics (BLS), a division of the federal Department of Labor, added a significant asterisk to the data due to recent hurricane disasters that affected tens of millions of people across the Southeast.
“It is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events,” the release cautioned.
But the Federal Reserve will be forced to rely on the data as best they can when making their next rate cut decision next week, which will likely come as votes are still being tallied across the country.
Realtor.com® Chief Economist Danielle Hale said in a statement that the near-term outlook for housing is still highly dependent on mortgage rates, which are teetering on the uncertain economic data and the outcome of the election.
“We expect mortgage rates to settle down and end the year in the low 6% range, but the trajectory will be highly dependent on incoming employment and inflation data, as well as the result of next week’s presidential election,” she said.
Sturtevant predicted the report won’t be enough for the Fed to enact another super-sized 50-basis point cut, as they did in September.
“Despite the unexpected jobs report today, which will undoubtedly take on even more importance leading into the last weekend before the Presidential election, the labor market and the overall economy continue to show signs of resilience. The Fed will probably cut interest rates again next week, likely by 25 basis points, half of the September cut,” she said.
Mortgage Bankers Association (MBA) Chief Economist Mike Fratantoni did not give a specific prediction for this month’s Fed decision, but said in a statement he didn’t think the data would change much in the long term.
“MBA is forecasting a slowdown in the pace of economic growth beginning in this quarter and extending through 2025 and expects that the Federal Reserve will respond by continuing to cut rates at a steady pace over the next year,” he said. “Longer-term rates, including mortgage rates, have largely priced in this expected path by the Fed, but today’s news is likely to bring mortgage rates somewhat lower as it adds more evidence that the economy is on a path to slower growth.”
Looking deeper at the data did not reveal any particularly surprising trends. Construction jobs slowed in-line with the larger decrease, still adding 8,000 jobs this month. Temporary jobs saw the largest decrease, with almost 50,000 less payrolls from last month. Conversely, healthcare jobs grew by slightly more than 50,000, in-line with recent trends.
Unemployment was unchanged from last month, but still down from a year ago, according to the BLS.
The Fed’s next meeting is scheduled for next Wednesday and Thursday, November 6 and 7.
