John's Finance Corner: BLS Job Totals Under the Microscope
May’s jobs report from the Bureau of Labor Statistics delivered some headline numbers that might catch the eye 139,000 jobs added from the “Business Survey.” However, this figure is wrapped in complexity. It’s based on models and estimates, unlike the more reliable “Household Survey,” which reflected a stark loss of 696,000 jobs. Experience has shown that initial BLS numbers are frequently revised downward January by 32,000, February by 49,000, March by 108,000, and April by 30,000. Such consistent adjustments present a challenge: Fed policy and market reactions typically react to initial data, even though it can be misleading.
A Tale of Two Reports: BLS Versus ADP
In contrast to the BLS data, the ADP report which tracks private sector jobs showed a much softer pace with only 37,000 new jobs added in May, falling short of expectations (115,000) and marking the slowest hiring pace since March 2023. The three-month average has slipped from 115,000 to 81,000, suggesting that the brisk hiring seen earlier this year is finally decelerating. For those monitoring the mortgage market, these disparities highlight a broader narrative: the labor market is showing early signs of cooling even if some headline figures appear strong.
The Fed’s Dilemma and Implications for Mortgage Rates
The Federal Reserve relies on dual mandates: anchoring inflation and maintaining a robust labor market. In theory, a softer labor market and lower inflation typically pave the way for Fed Fund Rate cuts, which could ease borrowing costs. Yet, if labor data consistently overshoots reality, money might shift from bonds to equities—and that could keep mortgage rates steady or even push them higher. The potential inaccuracies in labor data might be masking opportunities: if recalibrated for reliability, we could see decisively lower rates currently.
A Pivotal Week Ahead for Homebuyers
Looking forward, this week is crucial. With CPI and PPI inflation reports imminent, there’s an expectation of slightly higher inflation numbers partly driven by tariff expenses. Additionally, ongoing discussions between the US and China about tariffs and trade policies could further shift market dynamics. If progress is made, funds might divert from bonds to stocks, potentially placing upward pressure on the 10-year Treasury bond and, by extension, mortgage rates. In this uncertain environment, borrowers under contract without a locked rate might be wise to secure their rate before Wednesday’s reports are released.
Bottom Line for Informed Homebuyers
In these times of mixed economic signals, the key takeaway is to stay informed and act prudently. While the BLS numbers may seem encouraging at first glance, a deeper dive reveals that revisions, contrasting ADP figures, and looming inflation reports complicate the picture. For anyone navigating the home buying or refinancing process, understanding these nuances and acting quickly could mean the difference between locking in a favorable rate or facing a sudden price hike.
As you digest these developments, consider how a more reliable picture of our labor market could revolutionize decision-making in the mortgage space. What strategies have you found effective in balancing market risk with opportunity? I'd be happy to explore further nuances, such as the historical interplay between job revisions and rate movements or tips for navigating turbulent pre-report weeks, if that would help sharpen your edge in this market.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
