What the Latest Jobs Report Means for Rates 💼 🏠

Unemployment figures released last Friday in the jobs report by the U.S. Bureau of Labor Statistics show unemployment standing at 3.7% for December 2023. The report's findings on unemployment are key to understanding economic trends and their impact on the housing market, influencing consumer spending, loan eligibility, and housing market activities.

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Capping off the year with a stronger-than-expected 216,000 jobs added, healthcare, government, and social services saw the most significant payroll increase. Despite expectations of an increase, unemployment for December remained at 3.7%. The robust payroll growth and low unemployment rates indicate a continuously strong labor market.

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A strong labor market and stable goods pricing help ensure tenants and homeowners continue to pay rent and mortgage payments. However, slower-than-expected cooling of the labor market could simultaneously affect future Fed interest rate decision-making, as the Fed aims to cool the labor market. The 10-year treasury yields, which influence mortgage rates, pushed slightly above 4 percent following the release of the report. However, 10-year yields and mortgage rates continue to follow a downward trajectory.

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As employment, wages, inflation, and interest rates balance each other in the market, it will be essential to keep an eye on how these variables interact and can impact housing and rental markets. With the most recent jobs report signaling a strong labor market, we may not see rates drop as early as March.

However, a strong labor market with stabilizing prices points towards increasingly robust rent collections and fewer delinquencies due to loss of employment. Also, if rates remain higher for longer, homeownership will remain out of reach for many potential homebuyers, pushing them toward the rental market.

Plotify's Takeaway:

- December's job report ended the year on a solid note, with 216,000 jobs added.

- Unemployment remained at 3.7%, signaling strong labor market conditions.

- Ten-year treasury yields responded to Friday's report with a slight rise, suggesting that the strong labor market could prompt the Fed to sustain interest rates longer at current levels to combat inflation.

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