Employers added 142,000 jobs in August, according to the Bureau of Labor’s widely-followed monthly report. The tally fell below the expectation for 200,000+ jobs added.
This is the first month since January 2014 that payrolls failed to add over 200,000 positions.
“One can’t help but wonder if this is just a speed bump, or if it is a new trend,” said Jason Grote, co-owner of Central Coast Lending, noting that this time around, we don’t have a convenient large-scale answer like “poor weather” or “government layoffs” to serve as blame.
One cause for optimism, as noted by Wall Street Journal reporter Kathleen Madigan, is that demand for labor persists. The average workweek held at 34.5, and “if demand for labor was in reality weakening, the first thing businesses would do is cut the hours of their existing employees.” Another positive for labor: the number of “involuntary” part-time workers continues to decrease, which means that businesses are not widely cutting full-time workers to part-time, or adding only part-time jobs to hold down labor costs.
The workforce participation rate ticked down to 62.8% – the lowest reading since 1978 – and the employment-population rate of 59% was unchanged for the third straight month.
Investors didn’t see enough in the report to make any market-changing moves. The lower-than expected returns will “put everybody at heightened awareness,” said Grote, but in the meantime, concerns abroad (geopolitical issues and struggling European economies) hold center stage.
Economists seem to be taking the news in stride, and attributing the data as a “one-off” dip. Pimco co-CEO Mohammed El-Erian told CNBC’s “Squak Box” that he actually sees some good in the report. Long-term unemployment is down and the dip in the unemployment rate (6.1%) seems genuine (i.e. not propped up by people leaving the workforce).
At the end of the day, Grote doesn’t see much cause for panic. “To me it is just the growth pains of getting back to normal,” he said. “They can’t all be great months.”
Mortgage Rates Unchanged
Another piece of data that came out recently: second quarter GDP was revised up to +4.2%, suggesting that the economy enjoyed even more growth than expected. Ordinarily, this type of good news would put upward pressure on interest rates (click here to learn about why – and when – interest rates move).
The only problem: concerns abroad trump success at home. Germany turned in a recent quarter of negative GDP, the Russia-Ukraine issues continue, and European economic growth remains flat.
“If anything, you could argue there is downward pressure on rates,” said Grote. “The brighter U.S. economic outlook was supposed to mean higher mortgage rates, but instead they have stayed steady and even declined.”
Click here to read more about why rates have zigged (dropped) when everybody expected them to zag (jump).
First-Time Buyer Guide to the Central Coast
Mortgage rates have done their part to aid new buyers, but rising prices on the Central Coast have made the home purchase process a challenge. As we wrote in our Q2 SLO County real estate report, the median sales price of single-family Central Coast homes has jumped over 30% in the past 36 months.
As a result, this window of affordability for middle-income and low-income buyers hasn’t resulted in the kind of boom we might have expected for first-time buyers. Nationally, 29% of purchases were attributed to first-timers in May of 2014, where the historical average has been closer to 40%.
We have put together a thorough guide to help first-time buyers succeed. Use these tips to better understand the mortgage process, qualify for a loan, and then submit a competitive bid that will improve your chances of winning. Click here to view.
Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email us here to set up a free pre qualification. We are The Mortgage Experts: ask us anything!