To the surprise of economists, the Labor Department reported Friday that the U.S. economy added 353,000 jobs in January.
This data challenges prior expectations of a slowdown and paints a picture of a robust job market.
"These trends align with the Q4 GDP report, which showed more momentum in the economy at the end of the year and now into January. However, they contradict the declining trend in job opening and hiring rates," Mortgage Bankers Association Chief Economist Mike Fratantoni said. "And this news certainly runs contrary to the string of layoff announcements at many companies in recent weeks."
Fratantoni offered a word of caution about the report.
“A single data point should not change the direction of policy," he said. "However, we expect that the balance of incoming data will keep the Federal Reserve from cutting rates in March, and still anticipate that they will wait until the May meeting for a first cut. This certainly will depend on continuing declines in inflation between now and then."
Earlier this week, Fannie Mae Chief Economist Doug Duncan predicted that the Federal Reserve wouldn't start cutting rates until May.
What does the report mean for mortgage rates?
“The strong job market is good news for the spring buying season as higher household incomes are a necessary component, but it also means that mortgage rates are not likely to drop much further at this point," Fratantoni said.
First American Economist Ksenia Potapov said the jobs report offers a glimpse into what's happening with the construction industry.
"Speaking of housing, residential building construction employment was up 0.3% year over year in January, while non-residential was up by 0.2%. Compared with pre-pandemic levels, residential building employment is up 12.3%, while non-residential building is up 6.3%," Potapov said.
“The largest increase in monthly employment growth came from non-residential specialty trade contractors, whose primary activity is performing specific tasks – pouring concrete, site preparation, plumbing, painting, and electrical work-involved in building construction," she added.
The report shows that employment in professional and business services increased significantly, with 74,000 jobs added in January, far surpassing the average monthly increase in 2023.
The December numbers were also revised higher by 117,000. Job gains in November were revised slightly higher, too, by 9,000 to 182,000 jobs added. With these revisions, employment in November and December combined is 126,000 higher than previously reported.
