The U.S. labor market bounces back in November, after disruptions caused by hurricanes and widespread strikes. Despite a week filled with major economic updates, mortgage rates remained relatively stable, signaling a mixed impact from recent data. Here’s what you need to know about how the labor market is shaping up and what it could mean for the economy and your finances.
Stronger Job Growth in November
After a modest increase of just 36,000 jobs in October, the US labor market bounces back by adding 227,000 jobs in November, surpassing expectations of 200,000. The positive momentum didn’t stop there—job figures for previous months were revised upward by 56,000, reflecting stronger-than-initially-reported hiring trends.
Wage growth, another key labor market indicator, remained steady. Average hourly earnings were 4.0% higher than the same time last year, matching October’s growth rate. While stable wages can help consumers manage rising costs, they also keep pressure on inflation, which impacts mortgage rates.
Job Openings Point to a Tightening Market
The latest JOLTS (Job Openings and Labor Turnover Survey) report showed 7.7 million job openings at the end of October, exceeding expectations of 7.5 million. This translates to about 1.1 job openings per available worker—a significant increase from recent months, though still below the pandemic-era peak of over 2.0.
An increase in job openings often signals a tighter labor market, where companies must compete more aggressively for workers. This can lead to wage inflation, a factor that may concern mortgage markets due to its impact on overall economic inflation.
Mixed Signals from Other Economic Data
Beyond labor market updates, two key reports from the Institute of Supply Management (ISM) painted a mixed picture of the economy:
- Services Sector: The ISM services index fell to 52.1, the lowest level since February 2023, and missed expectations. Since any reading above 50 indicates growth, this suggests the services sector is slowing but still expanding.
- Manufacturing Sector: The ISM manufacturing index rose slightly to 48.4, showing improvement but still signaling contraction, as values below 50 represent a decline.
The divergence between services and manufacturing underscores a broader trend: service-based businesses continue to outperform manufacturers, a pattern that has persisted for the past couple of years.
What’s Next?
Looking ahead, investors will focus on upcoming inflation data to gauge the Federal Reserve’s next moves on monetary policy. The Consumer Price Index (CPI), set to be released on Wednesday, will provide a clearer picture of price trends for goods and services. The Producer Price Index (PPI), a measure of wholesale inflation, follows on Thursday, with Import Prices scheduled for Friday.
Additionally, global markets will keep an eye on the European Central Bank’s meeting on Thursday, which could have ripple effects on global financial conditions.
How It Affects Mortgage Rates
Although this week’s labor market data didn’t cause major shifts in mortgage rates, the relationship between wage growth, job openings, and inflation will remain critical. A tightening labor market could sustain inflationary pressures, which is generally unfavorable for mortgage rates. However, a balanced job market and slowing inflation trends could help stabilize rates in the months ahead.
