Voters across the U.S. will head to the polls next week with a hazier-than-desired understanding of the health of the nation’s labor market, following Friday’s release of October employment data from the Bureau of Labor Statistics (BLS).
Unequivocally, job additions in October came in far lower than the 223,000 jobs (revised) added in September. By the numbers, job growth stalled in October with nonfarm payrolls increasing by only 12,000 as strikes in the airline industry and recent hurricanes distorted the data collected.
“It is likely that payroll employment estimates in some industries were affected by the hurricanes,” the BLS noted in its report. “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.”
Manufacturing jobs declined by 46,000 in October “largely due to strike activity,” the BLS added.
Friday’s release of employment data was closely watched as it represented the last major economic index to be updated before voters head to the polls for Nov. 5’s presidential election.
“The number of new jobs created in October, an increase of 12,000, was well below consensus forecasts of 117,500 jobs,” said First American Chief Economist Mark Fleming. “However, temporary shocks like Hurricanes Helene and Milton and the ongoing Boeing strike all likely distort the headline results, so it’s hard to know the ‘true’ rate of job creation in October.”
The jobs report also influences whether the Federal Open Market Committee (FOMC) decides to cut interest rates by 25 to 50 basis points — or none — when it convenes next week.
“According to the CME FedWatch tool, the probability of the Federal Reserve cutting rates in November by 25 basis points is currently 99.5%, which is up from 95 percent yesterday," Fleming added.
After the Federal Reserve decided to slash its benchmark rate by 50 basis points in mid-September, last month’s report on new jobs added in September crushed expectations of loosening labor markets greasing the slide toward lower mortgage rates.
Instead, mortgage rates have steadily increased since mid-September, as yields on 10-year Treasuries have climbed from a low of 3.62% on Sept. 16 to a current high of 4.33% on Nov. 1.
With the average rate for 30-year, fixed-rate conforming mortgages ending the week of Oct. 31 at 6.72%, according to Freddie Mac, mortgage lenders have tempered their expectations of an end-of-year refinance boost.
In September, CoreLogic reported that 4 million borrowers representing $735 billion in unpaid principal balance (UPB) stand to benefit from refinancing when rates reach or drop below 6%.
As purchase demand bottlenecks with first-time homebuyers priced out of the market, rising rates keep affordability a primary barrier to higher production across the industry. A separate survey from mid-October shows 77% of sidelined homebuyers are “somewhat” or “very” prepared to buy once rates lower to a tipping point of 5.5%.
In the meantime, buyers have lost tens of thousands of dollars in purchasing power, according to Redfin, as conforming rates for 30-year-fixed mortgages have risen roughly 50 basis points since mid-September.
With today’s employment report obscuring the direction of future rate cuts, expectations that mortgage rate relief is still a long way off keeps the cone of uncertainty wide for mortgage lenders.
