The record-breaking home construction employment was even stronger than the leading indicators proposed last year but is gradually declining as signs of mortgage tightening emerge.
The number of non-bank mortgage lenders and brokers employed rose from 365,700 in November to 369,400 in December and from 310,300 in December 2019, according to the Bureau of Labor Statistics. The bureau's numbers in these categories were all slightly higher than previously estimated for the past year when reconciled with the BLS annual company census. October payroll was 353,500 after revisions.
While some lenders may have had "overstaffing" when interest rates first dropped sharply last year, mortgage companies should now have more predictable hiring needs, United Wholesale Mortgage CEO Mat Ishbia said in a call for earnings this week.
“If that [excessive attitudes] happens in the first month or maybe the second month after that, I get it; But nine months later it shouldn't be like that, ”he said.
UWM reported that it set a new volume record in the fourth quarter, but its consecutive profit was lower than the previous quarter as underwriting tightened on credit concerns created by the pandemic.
According to the latest index report from the Mortgage Bankers Association, loan availability fell slightly across the industry in December. The index fell 0.1% this month.
Credit availability generally decreases when employment is weaker.
Unemployment improved slightly in January, falling from 6.9% in the previous month to 6.3% in January. According to the BLS, however, unemployment is still well above the record low of 3.5% in January 2020. The BLS reports broader figures faster than some industry data.
As in the previous month, unemployment was potentially up to 0.6% higher due to a persistent categorization error affecting the office's data.
While the unemployment rate improved somewhat in January, there were signs that earlier job losses were taking hold.
"Although the overall unemployment rate has fallen, there are still 4 million people who have been actively seeking work for 27 weeks or more," stated Mike Fratantoni, chief economist for the Mortgage Bankers Association, in an emailed press release.
In January only 49,000 jobs were added to the economy. While this was an improvement on the downwardly revised 227,000 job loss in December, it was less than before the pandemic last January. U.S. employers created 214,000 new jobs this month.
While a relatively weak employment report could add upward pressure on benchmark 10-year government bond yields and mortgage rates, it was broadly unchanged overall on the back of weak employment growth. At 1.15%, the 10-year ratio shortly after noon on the east coast was only 0.6% higher.
Mortgage lenders have been so profitable that they may be able to keep their interest rates low for a while, even if the bond market is putting upward pressure on their margins.
This is likely to happen because the recent wave of IPOs by non-bank mortgage lenders is likely to put more pressure on large and influential players to generate continued growth for their shareholders, said Walt Schmidt, senior vice president and mortgage researcher at FHN Financial.
"I don't see that they are allowing prices to go up. They want to keep the volume going," he said.
These players are hoping to stay in a sweet spot where the economy is weak enough that rates stay low and they can generate volume, but not so weak that it hurts the stock market, Schimdt added.
With relatively weak gains in the employment report possibly suggesting additional government incentives, stocks were broadly higher as of Friday.
At midday, the Dow rose nearly 200 points, or 0.3%. Digital mortgage giant Rocket Co.s, which fueled the current wave of non-bank IPOs with its initial public offering, traded just slightly lower at $ 21.47, down 0.5%.