Blowout Jobs Report has Mortgage Rates Surging Again

Key Takeaways:

– Inman is hosting several upcoming real estate events, including Connect Miami, Luxury Connect, and Inman Connect Las Vegas.
– The release of a strong jobs report indicates that the Federal Reserve is unlikely to lower short-term interest rates in March.
– The report showed that the number of workers added to payrolls in January was close to twice as many as expected, and hourly earnings increased by 0.6%.
– The strong jobs report is seen as good news for the economy and may result in a “soft landing” rather than a recession in 2024.
– Federal Reserve officials want to see more data before considering rate cuts, and a March rate cut is now unlikely.
– The surge in job growth could result in a slower pace of rate cuts and potentially higher mortgage rates.
– Yields on 10-year Treasury notes, which influence mortgage rates, surged after the jobs report was released.
– The strong jobs report is seen as a vindication of the Federal Reserve’s decision not to cut rates in March.
– While the chance of rate cuts in March is now unlikely, there may still be a rate cut in May if the labor market weakens and inflation remains benign.


Mark your calendars for the ultimate real estate experiences with Inman’s upcoming events! Dive into the future at Connect Miami, immerse in luxury at Luxury Connect, and converge with industry leaders at Inman Connect Las Vegas. Discover more and join the industry’s best at

Mortgage rates were headed up again Friday after the release of a “head scratching” blowout jobs report that kills “stone dead” any chance that the Federal Reserve will begin lowering short-term interest rates in March, economists said.

U.S. businesses and government agencies added a seasonally adjusted 353,000 workers to their payrolls in January — close to twice as many jobs as expected — and the 0.6 percent increase in hourly earnings, to $34.55, was double the consensus.

The strong jobs report is good news for the economy, with more forecasters now expecting that past Fed interest rate hikes will cool inflation and produce a “soft landing,” rather than a recession, in 2024. But it comes on the heels of cautionary language from Federal Reserve policymakers at their first meeting of the year Wednesday on the timing of expected rate cuts.

While Fed officials indicated this week that they think inflation is headed in the right direction, they want to see more data before starting to bring the short-term federal funds rate — which is at the highest level since 2001 — back down. A March rate cut is not “the base case,” Fed Chair Jerome Powell said this week.

Ian Shepherdson

“If the March rate cut wasn’t already dead, it is now,” thanks to the strong jobs report, Pantheon Macroeconomics Chief Economist Ian Shepherdson said in a note to clients. “This is the first blowout payroll number for a while, and it is spectacular; the net headline increase, including revisions, is 479K.”

The numbers come “out of the blue,” Shepherdson said. “We saw a bit of upside risk to the consensus, but nothing like this much — and the gains are spread across the economy.”

Payrolls post strongest growth in a year

The monthly Employment Situation report from the U.S. Bureau of Labor Statistics showed the strongest payroll growth in a year, with the 74,000 professional and business services jobs added in January, “considerably higher than the average monthly increase of 14,000 jobs in 2023.”

Health care employment, which has grown by an average of 58,000 jobs a month in 2023, rose by 70,000 workers. Other sectors posting above-average gains included retail trade (45,000 jobs added), social assistance (30,000 jobs added) and manufacturing (up 23,000 jobs).
While federal, state and local governments added 36,000 jobs, that was below the average monthly gain of 57,000 jobs in 2023.

Mark Palim

“We believe that if job growth continues at such a strong pace, this could potentially result in a slower pace of policy rate cuts than what is currently expected by the market,” Fannie Mae Deputy Chief Economist Mark Palim said in a statement. “It could also present some upside risk to mortgage rates over the coming months, which would dampen increased housing demand coming from stronger job growth.”

10-year Treasury yields leap on strong jobs report

Yields on 10-year Treasury notes, a barometer for mortgage rates, surged 19 basis points (about a fifth of a percentage point) Friday, and lender surveys by Mortgage News Daily showed rates on 30-year fixed-rate mortgages jumping by 29 basis points, to 6.92 percent.

Long-term interest rates had been trending down this week, as the Fed is still expected to cut rates in May. The CME FedWatch Tool, which tracks futures markets to predict future Fed moves, on Friday put the odds of one or more Fed rate cuts by May 1 at 71 percent.

Mortgage rates and long-term Treasury yields had also been easing after New York Community Bancorp reported a surprise loss Thursday, raising concerns about the health of regional banks, Reuters reported.

“The bottom line here is that Fed officials will regard [Friday’s jobs] report as a vindication, at least for now, of their decision to resist market pressure to cut rates in March,” Shepherdson said.

While the “head-scratching numbers” kill the chance of March rate cuts “stone dead,” the May meeting is three months away, Shepherdson noted.

“We expect the labor market picture by then will be much less strong, and the inflation numbers will be benign, so we expect a 25 basis point cut” in May, he said.

Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

Source link

Property Chomp's Take:

Real estate professionals, mark your calendars! Inman, the leading source for real estate news and events, has an exciting lineup of upcoming events that you won't want to miss. Whether you're looking to dive into the future of real estate, immerse yourself in luxury, or connect with industry leaders, Inman has got you covered.

First up is Connect Miami, a conference that will take you on a journey into the future of real estate. This event will feature innovative technology, cutting-edge trends, and thought-provoking discussions that will challenge the way you think about the industry. Connect Miami is the perfect opportunity to gain insights from industry experts and network with like-minded professionals who are shaping the future of real estate.

If luxury is more your style, then Luxury Connect is the event for you. Immerse yourself in the world of high-end real estate and discover the latest trends in luxury living. This event will bring together top agents, brokers, and industry leaders who specialize in luxury properties. From exclusive networking opportunities to inspiring keynote speakers, Luxury Connect promises to be an unforgettable experience for anyone in the luxury real estate market.

And finally, there's Inman Connect Las Vegas, the ultimate gathering of industry leaders and professionals. This event is known for its high-energy atmosphere and unparalleled networking opportunities. Connect with top agents, brokers, and industry influencers as you learn from their experiences and gain valuable insights into the future of real estate. Inman Connect Las Vegas is the place to be if you want to stay ahead of the curve and take your real estate career to the next level.

So, mark your calendars and get ready for these incredible real estate experiences. Visit to discover more and join the industry's best at Inman's upcoming events. Don't miss out on the opportunity to learn, connect, and grow in the ever-evolving world of real estate.

Leave a Reply

Your email address will not be published. Required fields are marked *