What were the employment trends in April?
Today鈥檚 jobs report reflected another month of strong employment activity in May. Companies added 339,000 net new jobs, a sizable increase (+15.3%) relative to April, though unemployment ticked up 0.3 percentage points from last month鈥檚 low, reaching 3.7%. This month鈥檚 employment gains fell in line with the previous six months鈥� level. Job gains were spread across various industries in May, including professional and business services, government, health care, construction and warehousing, and social assistance sectors.
Inflation is still running hotter-than-desired with the Consumer Price Index reporting prices 5.5% higher than one year ago (excluding food and energy) and the Personal Consumption Expenditure Price Index at 4.4% year-over-year in April. Both of these measures are down from their peak, but well above the target level of 2%, despite the Fed鈥檚 repeated rate hikes over the last year. Though showing signs of cooling, both inflation and employment have displayed considerable resilience. In the FOMC鈥檚 May meeting, the committee鈥檚 statement included language that created space for a pause on rate hikes in the upcoming meeting. However, persistent inflation has resulted in futures markets pricing in a greater likelihood of a rate increase in June and a zero percent chance of a rate cut. If the FOMC chooses to continue on their contractionary path in June鈥檚 meeting, we can expect to see the cost of borrowing continue to rise, including for a home purchase.听听
Wage growth remained strong at 4.3% higher than last May. Wage growth continues to cool from a high of 5.9% in April 2022, but remains above pre-pandemic levels.
In April, , recovering some ground relative to March鈥檚 dip. There are still nearly two open jobs for every out-of-work job seeker, meaning the labor market remains tilted in favor of workers. Total job separations fell in April, reaching the lowest level since May 2021, with layoffs, discharges and quits all decreasing compared to March. However, with the number of unemployed workers rising from 5.8 to 6.1 million in May, a more even balance between open roles and job seekers could be ahead.聽
What does today鈥檚 data mean for homebuyers and sellers and the housing market?
Still strong employment data suggests that households continue to be in a good position to weigh their housing options, though affordability limits possibilities for many. Home price growth slowed again in May, increasing just 0.9% compared to May 2022, the lowest level of annual price growth in the data鈥檚 history (back to 2016). The continued strength of the labor market, improved consumer confidence, and near-negative home price growth suggests a more balanced future for the housing market. Though the possibility of another rate hike introduces the possibility of higher mortgage rates, reining in inflation will ultimately serve to bring down mortgage rates and introduce sought-after stability to the market.
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