This past week, the Bureau of Labor Statistics (BLS) released its latest jobs report — and while the headlines looked positive at first, the details tell a very different story. Unfortunately, the initial market reaction to the headline number pressured mortgage bonds, driving mortgage rates higher in the short term.
Here’s what really happened, and why it matters if you’re buying or selling a home right now.
The BLS reported that 139,000 jobs were created in May, which came in above the estimate of 125,000. However, as we’ve seen repeatedly, the BLS once again revised the prior month’s figures lower — and this latest number is also likely to be revised much lower in future updates.
In addition to overstated job growth, wage pressure inflation added fuel to the fire.
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Average hourly earnings rose by 0.4%, exceeding the expected 0.3%.
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Year-over-year, average hourly earnings came in at 3.9%, above the 3.7% estimate.
The jobs report is based on two different surveys:
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The business survey produces the headline job creation number.
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The household survey determines the unemployment rate.
While the headline number showed job gains, the household survey revealed a very different picture — it reported 696,000 job losses. Normally, with such a significant loss of jobs, we would expect to see the unemployment rate rise sharply.
But here’s the catch: 625,000 people left the labor force or were no longer counted. Because of this, the official unemployment rate remained at 4.2% (it inched up fractionally from 4.19% to 4.24%), avoiding a more dramatic increase.
If those 625,000 individuals were included in the labor force and unemployed counts, the unemployment rate would have actually jumped to 4.6%.
What does this mean for mortgage rates?
The market initially reacted to the headline job creation number and higher-than-expected wage inflation — both of which pressured mortgage bonds and caused rates to worsen. The underlying weakness in the labor market didn’t grab the same headlines.
Right now, the hope is that the market will begin to look past these initial headlines and focus on the revisions and other weak points in the report. If that happens, we may see bonds recover some of their losses and rates improve.
The bottom line: Even when the economy shows signs of slowing, mortgage rates can still spike temporarily due to misleading or incomplete headlines. It’s important for buyers and realtors to stay informed about what’s really driving the market.
If you’re considering buying a home — or if you’re advising clients who are — don’t let short-term headlines derail your long-term plans. I’m here to help you navigate the current rate environment with clarity and confidence.
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By Sal Trapani, MJ Mortgage LLC | Source: MBS Highway
About Me
I’m Sal Trapani, a trusted mortgage broker and the owner of MJ Mortgage LLC, based in Magnolia, Texas. I work with homebuyers across Texas, helping them navigate the loan process with clarity, strategy, and confidence.