Nonbank mortgage jobs tank for second month

Nonbank mortgage payrolls declined for the second consecutive month, but with mass firings increasing towards the end of June, the most recent statistics fail to represent the full extent of recent workforce reductions in the field. 

Combined estimates for mortgage banker and mortgage broker payrolls in June totalled 410,000, compared with a slightly downward revised 417,900 in May and 425,200 in April, according to the Bureau of Labor Statistics. The mortgage industry employed a revised 423,000 people in June 2021.

These numbers don’t cover recent actions like Sprout Mortgage’s sudden closure, or layoffs at New American or RoundPoint. Mortgage industry data lags the broader jobs release by one month.

Total nonfarm payroll employment increased by 528,000 in July, while the unemployment rate edged down to 3.5%. Payroll employment reached the pre-pandemic peak level set in February 2020, which erased all of the job losses from the last two-and-a-half years, Fannie Mae chief economist Doug Duncan noted.

“This remains one of the strongest job markets in the past 50 years, no comfort for those hoping for a slowdown which would reduce inflation and lead to a less aggressive path of rate hikes from the Federal Reserve,” Mortgage Bankers Association Chief Economist Mike Fratantoni said.

Construction sector jobs increased by 32,000 in July, which is good news for mortgage activity. “Although housing demand waned due to a spike in mortgage rates, builders continue to add supply to a market that needs it,” Fratantoni said. “With solid wage gains and a recent drop in rates, some buyers may return to the market.”

A need remains for workers to build and repair homes, even as builders deal with a slowing market, added Odeta Kushi, deputy chief economist at First American Financial.

“While the housing sector slows, the construction industry has faced a skilled labor shortage for many years and will continue to try and fill empty positions,” Kushi said. “The best way to attract and retain workers is to pay more.”

The positive general jobs report makes it likely that a 75 basis point increase in the Fed Funds rate in September is likely the last one in the current series, said investment banker Louis Navellier.

“Overall, this was a stunning payroll report and bodes well for third-quarter GDP growth,” Navellier said. “The impact of the strong payroll report is soaring Treasury yields.”

That included the benchmark 10-year Treasury, one factor that affects pricing of 30-year fixed rate mortgages; at 12:45 eastern time on Aug. 5, it was up 17 basis points on the day to 2.84%. On Aug. 2, the 10-year at one point was as low as 2.53%.

But taking the opposite view on how the Fed will act was James Bentley, director of Financial Markets Online.

“The world’s largest economy has trounced expectations on the jobs front,” said Bentley in a statement. “This will only embolden a Fed that is looking for reasons to keep tightening at pace and dollar strength surged accordingly.”

Furthermore, the Conference Board warned that while the U.S. employment picture is still buoyant, it is in the face of slowing economic activity.

“Usually, hiring decisions react to changes in business activity a few months later,” Frank Steemers, senior economist said. “Therefore, hiring is likely to decelerate over the coming months.”