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Interest rates dropped below 7% for the first time since February 13th!
This week was all about jobs, with the release of the ADP jobs report on Wednesday and the Bureau of Labor Statistics (BLS) jobs report today. In this video, we dive into the jobs data, as it is incredibly important for the direction of interest rates and one of the main reasons why interest rates are where they are right now.
It's been difficult to fully believe the BLS report, which is the Fed's favorite benchmark for jobs. There has been huge disparity between the ADP report and the BLS reports.
The BLS report is a lot more nuanced. They can adjust numbers at their discretion, as the data is based primarily on modeling and imputed data. Sure enough, the BLS report today showed 167,000 jobs, downward revisions from the previous two reports in December and January where they reported jobs this month at 275,000.
Why is this significant? Wall Street typically reacts to the headline numbers. They know that the Fed relies on these numbers to direct economic policy by raising or lowering the Fed funds rate.
The BLS job numbers have been revised downward virtually every single month for the last year and a half. However, Wall Street has to rely on this data; they trade mortgage-backed securities based on the data available at the time. The headline numbers really are what they're trading on. Wall Street has a difficult time interpreting the data. When you have uncertainty, it's hard to really make those financial decisions.
The ADP report, on the other hand, has more solid data, but it does not count jobs created by the government. There's some interpretation to be made. This report has been steady, showing modest growth in jobs.
A strong job market concerns Wall Street, as it typically leads to higher inflation. Conversely, a weak job market means employers don't typically have to pay as much when, which helps reduce wage inflation.
All this said, the Fed might be starting to recognize some weakness and cracks in the economy. Most of the jobs created are part-time jobs. We're losing full-time jobs. Credit card debt is well over $1 trillion, and consumers are getting maxed out.
The Fed cannot wait too long to start adjusting the Fed funds rate downward, or the economy could fall into a recession.
There may still be a window - granted, it's getting smaller and smaller - for homebuyers to take advantage of having less buyers to compete with in the market right now. When rates moved over 7% in February, there was a definite slowdown in buyer activity. With rates dropping back into the high 6% range again, we anticipate buyers to start coming back.
The media will report on that data soon, and when rates fall further, we will definitely see more buyer activity with the limited inventory. We could see multiple offers again, particularly on well-presented listings.
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