The April jobs report provided a mixed outlook on the health of the economy as the headline figure was reported below expectations. Combined with tepid GDP growth of 0.5 percent in the first quarter, the expectations of an increase in the federal funds rate at the June meeting is in doubt until more data is released. A somewhat bright spot in the report was wage growth, which has advanced 2.5 percent in the past year. Overall, the April jobs report will keep interest rates low until a clearer picture of the strength of the economy emerges.
Employers added 160,000 jobs last month, fueled by gains in the professional and business services and healthcare fields, which contributed a collective 109,000 positions. Financial activities also posted solid gains with 20,000 new spots added. Weakness in the energy sector resulted in 8,000 job cuts during April, bringing losses in the sector to nearly 200,000 positions since the previous peak.
Although job gains last month were the lowest since last September, April’s low number can be explained by mild winter weather. The construction sector, for example, added just 1,000 jobs last month, compared to 38,000 positions during the same month in 2015. Many of the spring construction jobs were filled in February and March as warm weather enabled developers to bring projects out of the ground ahead of schedule.
For real estate investors, the window of extremely low interest rates will remain open for a little bit longer. As the housing market enters the spring buying season and purchasing activity intensifies, the availability of inexpensive leverage will support higher returns despite competition. Currently, investment interest rates begin in the low-4 percent range, while traditional mortgages offered by Freddie Mac are in the mid-3 percent range.