626 viewsGregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Happy New Year! Today, The Line returns after a few weeks off with the latest on the labor market and mortgage rates.
Employment Up More than Expected in December
Payrolls rose by 216,000 last month, easily beating the Dow Jones estimate of 170,000. Job growth before revisions came in above expectations in 8 of the 12 months of 2023, showing us just how pessimistic economists can be.
Here are the other key takeaways from the report:
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For all of 2023, employment rose by 2.7 million. Down sharply from the previous two years, but much higher than before the pandemic.
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The unemployment rate held at 3.7%, while economists were expecting it to tick up to 3.8%.
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Wages rose 0.4% last month and are up 4.1% over the past year. Both of those figures were higher than expected and are not good news for the fight against inflation.
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Employment figures for October and November were revised down by a total of 71,000.
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The biggest contributor to job growth last month was government, which added 52,000 jobs. Here’s a chart of job growth by industry last month.
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Both the labor force participation rate and average weekly hours declined, the only real bad news in this report.
In other labor market news, we found out this week that there are still 8.8 million available jobs out there. While that figure was down 62,000 from the last reading, there are still 1.4 available jobs for each unemployed person. Weekly jobless claims fell by 18,000 to 202,000, which is a very low number.
What does this all mean? It means that those of you expecting the Fed to start cutting rates in March can forget about it. Job growth remains very strong, wages are rising at a fast pace, and inflation remains above the Fed’s target of 2%. So, we’ll all just have to enjoy the fact that companies are still hiring at a brisk pace for now, and don’t expect any rate cuts until the second half of 2024.
Mortgage Rates Tick Up, but That's Not the Real Story
According to Freddie Mac, the average 30-year mortgage rate was 6.62% during the week ending January 4, up from 6.61% the prior week. This isn’t anything to be excited about, but what is exciting is the decline in rates over the past 2+ months. Since hitting a 23-year high of 7.79% the week ending October 26, 2023, rates are down 1.17%. Now that’s something to get excited about, and the best is yet to come. Economists are looking for rates to move lower this year, and possibly even falling below 6% by the year’s end. I agree rates are headed lower, and given how fast rates have declined recently, I think 6% mortgages are very likely before the end of 2024.