Mortgage jobs inch up, broader employment and rate outlook mixed

Nondepository hiring in housing finance bounced back a little in May after falling to a point where it looked like a lot of the overcapacity in the market had been removed.

Representative estimates for nonbank mortgage banker and broker payrolls inched up to 343,800 from an upwardly revised 341,100, according to the Bureau of Labor Statistics. The small gain came almost entirely from lender additions while broker numbers plateaued.

The mortgage hiring in May — which is typically a seasonally strong period for housing — and June's broader employment gains (which are reported with less of a lag than the industry-specific stats), bode well for the industry in some respects, but lenders remain wary of uncertainties around rates.

"If employment is too strong, the Fed is going to have to continue to raise rates," said Melissa Cohn, regional vice president at William Raveis Mortgage, after a private payroll report from ADP registered unusual gains Thursday.

This concern drove mortgage rates to a 2023 high this week. Economists had mixed views on whether the overall job gains in BLS numbers reported Friday were tepid enough to convince policymakers not to keep putting upward pressure on financing costs.

"The weaker job market combined with decelerating wage growth and calming consumer price inflation are clear indications for the Federal Reserve to stop raising interest rates," said Lawrence Yun, chief economist, National Association of Realtors, in a report Friday.

Mike Fratantoni, chief economist at the Mortgage Bankers Association, took a different view of the overall jobs number, which was reported with less of a lag than mortgage industry estimates and showed 209,000 positions added in June with a historically low 3.6% unemployment rate.

Fratantoni expects the Federal Open Market Committee to raise short-term rates at its next meeting.

"While job growth and wage growth are trending down, both are still well above the pace that would be consistent with the Federal Reserve's inflation target. We now expect that the FOMC will raise the federal funds target another 25 basis points at its July meeting," Fratantoni said.

In addition to rates, another wild card for mortgage industry hiring is whether demand for homes will keep outpacing supply in a way that sustains interest in new purchases.

So far it has, if hiring by builders is any indication, according to Odeta Kushi, deputy chief economist at First American.

"The construction industry is very interest-rate sensitive, so many expected job growth to crater. Yet, new-home construction has been supported by the lack of existing-home inventory," Kushi said Friday, noting that June employment in the residential sector was up 0.8% annually.

It's possible that some of the demand in this part of the job market could trend away from new homes and toward renovations, which maintains demand for labor, but may diminish purchase mortgage activity and potentially add to home-equity or renovation loan interest, she added.

"With existing homeowners rate-locked into their home and with not enough homes on the market, consumers may decide to renovate their own home instead of trading up," Kushi said.