A strong jobs report appeared to defy fears of an impending recession, but contained warning signs for the housing market.
The U.S. economy added 372,000 new jobs in June, with notable gains in the recreation and hospitality sector, according to data released Friday by the Department of Labor. Unemployment remained at 3.6% for the fourth consecutive month.
“Strength in the labor market is still positive for the housing market,” Joel Kan of the Mortgage Bankers Association said in a statement, “but aggregate demand has cooled off due to the recent spike in mortgage rates, high house prices and growing economic uncertainty”.
The biggest hike in federal interest rates in three decades has weakened housing demand and contributed to a wave of layoffs at brokerages, mortgage lenders and real estate startups.
As mortgage rates approached 6%, lenders including JPMorgan, Mr. Cooper and Texas-based First Guaranty Mortgage each laid off hundreds of employees. Brokers such as Compass, Redfin and Side and rental startup Zumper also made cuts.
Mortgage rates slipped to 5% in early July, but strong job numbers and another expected hike in federal interest rates could keep them high.
“With the Federal Reserve resolutely focused on reducing inflation, we expect this will not alter near-term expectations of another 75 basis point rate hike. [at its July meeting]“, said Kan.
Leisure and hospitality businesses, including hotels, restaurants and bars, added a substantial 68,000 jobs last month, although the industry still employs 1.3 million fewer people than in February 2020 .
Employment in warehousing increased by 18,000 in June, eclipsing, on a seasonally adjusted basis, hiring in the retail sector, which added 15,000 jobs. Construction hiring remained essentially flat, according to the report.
Low unemployment means workers for construction jobs are scarce, according to RSM real estate analyst Nick Grandy.
“The industry is still lacking a significant number of jobs,” Grandy said in a statement. “It will likely continue to follow this trend with the funding of new infrastructure programs, which will boost government spending in the sector in the second half of the year.”
Wage growth continued in June, although at a slower pace than in previous months. The average hourly wage rose 5.1% last year, below the pace of inflation, “especially for large household expenses such as food, fuel and housing,” Kan said.
The percentage of people working remotely fell from 7.4% to 7.1%, reflecting the rate at which people returned to the office in May.
The Labor Department also revised its reported job gains in April from 436,000 to 368,000 and in May from 390,000 to 384,000, erasing 74,000 jobs gained during the two-month period.