Jobs Report - Good News or Bad News?

A jobs report no one wanted but at the same time, everyone is celebrating. Let’s break down why it’s not only loan officers rejoicing for lower interest rates but why economists feel validated, politicians are drooling, and the real estate market is getting ready for yet another pivot. By the end of today’s blog I want you to be able to confidently articulate exactly who the big opportunity is being presented to right now. 

Let’s start with the data from this morning’s report. Only 22,000 jobs were added in August which signals a sharp slowdown in hiring. We’re not talking about a job market that is cooling, we are talking cold. That suggests broader economic vulnerability. Unemployment rose to its highest level in 4 years. And per usual, we saw revisions to previous numbers. June’s already weak numbers were revised even worse, now showing a net loss in jobs. That is the first contraction a jobs report has given us since December of 2020.  

Americans are having a harder time finding stable employment, bottom line. That is the validation economists have been looking for while feeling crazy the economy really wasn’t as strong as it appeared. So now the question shifts away from whether or not America is becoming great again and more towards, how resilient is our economy. How much distress will it be able to tolerate between a weak labor market and inflation that is persevering like that one guy you gave your number to by accident in 2017 who still engages with your IG stories of your kids? 

That’s the question the Fed will face, and Trump will politicize. Instead of rehashing last weeks’ drama packed episode, I’ll encourage you to go back and rewatch because Fed independence is something we should all have an educated opinion on – no matter how badly we want lower interest rates. 

Psychology vs. Policy 

A bond rally doesn’t mean Main Street is cheering. 

It was a great day to lock a loan; I will tell you that. I am after all a loan officer, and I do love to see mortgage bonds in the green. It would just have been better if we had lower interest rates while people had jobs so they could qualify for a loan, ya know? 

I’m being dramatic but I think it’s something we should pay attention to. If jobs vanish, it doesn’t really matter how low interest rates are right? No, job, no house, no mortgage need. Dave and I talked about this on Property Pursuits this week. Buyers and sellers tend to move on headlines, not the math. By the time rates make headlines, the best opportunities have already been snatched up by savvy investors or proactive agents looking out for their clients.  

So the wealth gap widens. 

You’ve heard this before. Recessions make millionaires. Most Americans don’t look for a weak market to invest in, right? Even though we know the ones who bought when property values were lower were the ones who had the biggest gains. We know that, but we don’t use it to inform our strategy. That’s the irony of the psychology of money. 

I don’t want it to be the irony of your story though. So here’s what buyers and sellers need to do right now: 

Buyers: 

This is your sneak preview of the market to come. Rates have already dipped in a very real way, without any official rate cut from the Fed. You can lock in a lower interest rate while negotiating a deal with a seller before the general public catches on and takes action. This boosts your buying power in a very real way – moving your payment by hundreds, especially for FHA buyer and…you’re not expecting this, but it will make sense – luxury buyers using jumbo loans. 

You should also update your preapproval with your lender because this move in interest rates is significant enough to impact your buying power. Realtors, I would literally be describing this moment in time to my clients as a backstage pass. Once the show is on the main stage they are going to be lost in a very crowded audience. 

Sellers: 

Buyers are waking back up and they are re-energized. I would refresh your listing or finally go live – use this window to increase your reach however you need to. If you have a listing that has been sitting for a while, start using marketing that encourages buyers to take advantage of the “rate relief” we are now experiencing. If you’ve been waiting on interest rates to fall before you move, it’s time to put your money where your mouth is. Call your realtor! 

Just don’t mistake movement for momentum. 

I’ve gotten smacked upside the head too many times over the past 24 months by this market. We’ve popped champagne only to have it go flat – thinking a trend in the right direction with rates was going to continue and then seeing them jump higher than they were before the downward trend. Both the markets and the Fed are data dependent which creates fragile windows of opportunity rather than clear trendlines.