September employment report disappoints; Fed remains on track to taper in November
Nonfarm payrolls fell well short of economists’ estimates of increasing by 500,000 in September, gaining just 194,000. The biggest declines occurred in government jobs, which lost 123,000. Private payrolls gained 317,000, with Leisure & Hospitality, the sector most heavily hit by the pandemic, gained just 74,000. Despite poor gains in September, August Nonfarm payroll gains were upwardly revised to 366,000 from 235,000.
Unemployment rate dropped
While those jobs numbers were disappointing, the Unemployment Rate dropped to 4.8% from 5.1%. Most attribute this to a drop in the participation rate, as potential workers removed themselves from the workforce after pandemic employment benefits expired last month. September also saw a rise in wage growth, up .6% month-over-month, as employers were forced to pay higher wages amidst the growing labor shortage.
Tapering likely moving forward
With inflation more than double the Fed target rate of 2%, experts generally expect the Fed to lay out its plan to begin removing pandemic-related accommodations as soon as November. Interest rate futures markets currently indicate the first Fed rate increase will occur about one year from now.
Despite soaring inflation, the labor market is still tracking well below the Fed’s goal of full employment. Nonfarm job growth of less than 200,000, some believe, would likely cause the Fed to postpone their plans to taper bond purchases next month, but with the upward revisions to Nonfarm payrolls in August, the market consensus is that the Fed will move forward with tapering.
Post-employment report market movement on Friday confirmed that; prices on mortgage-backed securities fell by 11/32nds as the bond markets prepared for less buy-side support from the Fed. Generally speaking, 30-year mortgage rates have increased by nearly .25% since the Fed indicated it was on the verge of removing accommodation.
Jeremy Collett is Guaranteed Rate’s Executive Director of Capital Markets. Market Updates are designed to provide readers with a high-level yet insightful view of how economic news, events and trends affect mortgage rates and the homebuying process.
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