A strong jobs report seemed to defy fears of a looming recession, but contained warning signs for the housing market.
The U.S. economy added a robust 372,000 new jobs in June, with notable gains in the leisure and hospitality sector, according to data released by the Department of Labor on Friday. Unemployment remained at 3.6 percent for the fourth straight month.
“The strong labor market is still a positive for the housing market,” the Mortgage Bankers Association’s Joel Kan said in a statement, “but overall demand has cooled from the recent jump in mortgage rates, high home prices, and rising economic uncertainty.”
The largest federal interest rate hike in three decades weakened demand for homes and contributed to a wave of layoffs at brokerages, mortgage lenders and real estate startups.
As mortgage rates approached 6 percent, lenders including JPMorgan, Mr. Cooper and Texas-based First Guaranty Mortgage laid off hundreds of staffers each. Brokerages such as Compass, Redfin and Side and the rental startup Zumper also made cuts.
Mortgage rates slipped back toward 5 percent in early July, but strong job numbers and another expected federal interest rate hike could keep them elevated.
“With the Federal Reserve intently focused on bringing down inflation, we expect this will not alter near-term expectations for another 75-basis-point rate hike [at its July meeting],” Kan said.
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 it did in February 2020.
Employment in warehousing rose by 18,000 in June — eclipsing, on a seasonally adjusted basis, hiring done in the retail sector, which added 15,000 jobs. Hiring in construction remained mostly flat, according to the report.
Low unemployment numbers mean workers to fill construction jobs are in short supply, according to RSM real estate analyst Nick Grandy.
“The industry is still short a significant amount of jobs,” Grandy said in a statement. “It will likely continue to trend that way with new infrastructure programs being funded, which will boost governmental spend in the sector during the second half of the year.”
Wage growth continued in June, although at a slower rate than prior months. Average hourly earnings have increased by 5.1 percent in the last year, below the pace of inflation, “especially for important household expenditures such as food, fuel, and housing,” Kan said.
The percentage of people working remotely fell from 7.4 percent to 7.1 percent, mirroring 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 in the two-month period.