Steady Job Gains with Inflation in Focus

Tariff developments kept mortgage markets on edge again this week, although there was little net change by the end. Stronger-than-expected wage growth contributed to slightly higher mortgage rates, while other economic indicators offered mixed signals.

Job Growth and Wages Show Strength

The latest Employment report showed that the economy added 139,000 jobs in May, exceeding the consensus forecast of 130,000. However, revisions to previous months’ figures reduced the net gain. The unemployment rate held steady at 4.2 percent, as expected. Average hourly earnings rose 3.9 percent compared to a year ago, up from 3.8 percent in April and above forecast. This kind of wage growth supports homebuyer confidence and affordability, which can fuel demand in the residential real estate market, even in the face of higher rates.

Service and Manufacturing Data Weaken

Two important reports from the Institute of Supply Management revealed weakness in business activity. The national services sector index declined to 49.9, missing expectations and falling below the critical 50 level that indicates sector expansion. The manufacturing index fell to 48.5, also below forecast. Slowing momentum in these sectors may impact job stability in related industries, which can translate to more cautious homebuying behavior and potentially slower sales cycles in residential real estate.

Trade Deficit Sees Major Shift

After surging to a record high of approximately 140 billion dollars in March due to front-loaded purchases, the United States trade deficit returned to more typical levels in April. The gap narrowed to 62 billion dollars, well below forecasts, driven by a 16 percent drop in imports and a small gain in exports. With global trade uncertainties easing, there may be less upward pressure on construction materials and appliance costs, which could slightly improve new home affordability and availability.

ECB Cuts Rates While Watching Trade Risks

On Thursday, the European Central Bank lowered its benchmark interest rate by 25 basis points to 2.0 percent, down from a peak of 4.0 percent in 2023. This expected move drew a muted market reaction. The ECB explained that ongoing trade disruptions are creating downside risks for growth and inflation across Europe. Lower global rates may help ease pressure on U.S. mortgage rates over time, making financing more attractive for prospective homebuyers.

Looking Ahead

Markets will now turn to upcoming inflation reports for direction. The Consumer Price Index (CPI), which measures changes in prices across a broad range of goods and services, will be released on Wednesday. The Producer Price Index (PPI), which tracks business-level inflation, follows on Thursday. The next Federal Reserve meeting will take place on June 18.

For residential real estate, the outlook remains balanced. Solid job growth supports buyer activity, but all eyes are on inflation data to determine whether mortgage rates will stay elevated or begin to ease. If you are considering buying or selling, now is the time to discuss a personalized strategy based on where rates may be headed.