U.S. job growth moderated in November, with non-farm payrolls coming in at about 155,000 for the month – down from the 190,000 that analysts had predicted – according to the Bureau of Labor Statistics.
Unemployment remained unchanged for a third straight month at 3.7%.
The biggest job gains were in health care, manufacturing and transportation/warehousing.
Average hourly earnings increased 0.2% in November compared with October and were up 3.1% compared with November 2017.
The average hourly wage for all private non-farm payrolls increased by six cents to $27.35.
The total number of unemployed was little changed at 6.0 million.
“The headline in today’s jobs report came in on the soft side, as weakening hiring and a net downward revision in the prior two months sent the three-month average payroll gain to the weakest pace in a year,” says Doug Duncan, chief economist at Fannie Mae, in a statement. “Annual wage growth held steady at 3.1%, keeping the visible upward trend that started about a year ago intact.
“The trend was consistent with the income component of the Fannie Mae Home Purchase Sentiment Index (HPSI), which showed the net share of consumers reporting higher household income over the past year jumped to a survey high in November,” Duncan adds. “However, news from the jobs report was far from rosy for the real estate sector, as construction hiring posted the worst showing since March. Overall, we believe the report supports our expectation that the Fed will hike the federal funds rate in December, and then twice next year before pausing to assess economic conditions.”
Mark Fleming, chief economist for First American says although some were speculating that recent volatility in financial markets would result in the Fed moderating the pace of its rate increases, “continued strong wage growth is one data point in favor of further rate increases in 2019.”
In this slow housing market, however, further rate increases may not necessarily result in higher mortgage rates.
“While the monthly average for the 30-year, fixed-rate mortgage increased from 4.83 percent in October to 4.87 percent in November, an early December decline in long-term Treasury bond yields will likely cause mortgage rates to decline in December – a likely early Christmas present for consumer’s house-buying power,” Fleming says.
The increase in wage growth is perhaps one silver lining in a struggling housing market where supply is constrained and prices are at all-time highs.
“The more consumers earn the more home they can afford to buy,” Fleming says. “Based on the reported wage growth this month, estimated household income growth increased 3.1 percent compared with a year ago.”
“While rising mortgage rates reduce consumer house-buying power, rising household income increases house-buying power,” he adds.
Fleming says that in November, consumer house-buying power declined a modest $500 compared with October but declined $30,000, or 8.0%, compared with November 2017.
“If household income had not increased compared with a year ago, rising mortgage rates, which jumped from 3.9 to 4.9 percent over the last year, would have reduced consumer house-buying power by $42,000,” he says. “Rising household income mitigated the impact of higher cost mortgages by $12,000.”