Job Growth Weakens

The big news of the morning was the report on estimated wage growth in the month of May by the Bureau of Labor Statistics. In what is shocking news to many who believe the labor market is too strong to face a slow-down, the report showed that there were only 75,000 new jobs created last month. Given that May is generally the month when many seasonal jobs open, as well as when many students seek summer income, this is not a good sign. This will certainly boost calls for a Federal Reserve rate hike, which not too many months ago was the furthest thought from the minds of the Fed. Since the job market has been a pillar of strength for the U.S. economy, a slowdown in new hires will have a trickle-down adverse impact to the housing market. Once again, most don’t see this happening. However, unless the Fed acts quickly to help slow the start of a recession, I see the housing market slowing.


In July, this will officially be the longest-ever expansion for the world’s largest economy. One of the strongest arguments many bullish economists have is the strength of the job market as a reason we will miss a recession this cycle and continue our expansion. I again feel compelled to point out that in history, every time the Unemployment Rate hits a cycle low, it was followed by a sharp increase. Our Unemployment Rate remains near a 50-year low, at 3.6%. How much lower can we expect this rate to fall? If it does fall even lower, which would be minimal if it does, what is the next immediate move? History tells us it will be higher. So, let’s keep this in mind when speaking to people who don’t see a recession coming. Also, remind them that in 2007, the Fed’s prediction of a pending recession was 15%. Well, we all know what happened shortly after. The Fed had it wrong then, and they likely have it wrong now.


Mortgage interest rates remain near lows last seen in early 2017. We are right now beneath another strong ceiling. If we can break above this, we will have a floating stance. However, until that happens, be cautious and watch the market closely. Be prepared to lock.

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