A resilient labor market may finally be bowing under the pressure of back-and-forth tariffs, the now five-month-long war against Iran and inflationary pressure on wages, with the federal Bureau of Labor Statistics (BLS) reporting a decrease of 23,000 payrolls in July with downward revisions of previous months.
Most sectors lost jobs, with healthcare a notable exception (adding 22,000 jobs). Residential construction lost about 500 jobs, while the real estate sector—which includes appraisers and other related businesses—was essentially flat.
All eyes will be on the Federal Reserve ahead of its September meeting, as new chair Kevin Warsh confronts a very different economy from the beginning of the year.
“The weaker July employment data might provide a little breathing room for the Federal Reserve as it considers its next policy move,” said Mortgage Bankers Association (MBA) Chief Economist Joel Kan. “We anticipate that the Federal Reserve will raise the fed funds rate in early 2027, but any additional upside surprises to inflation are likely to bring that timetable forward.”
With mortgage rates climbing over 30 basis points this summer, according to Freddie Mac, there is little hope of relief from the Fed in the medium-term, and a rate hike would be an unwelcome complication for a housing market that has endured years of macro headwinds. Before the beginning of the Iran war, Fed members had projected at least one rate cut in 2026.
In a statement, Realtor.com® Senior Economist Jake Krimmel characterized the summer market as being on “cruise control,” but didn’t see the labor market deceleration as a meaningful factor right now.
“Pending sales continued to beat last year’s pace (though that lead is narrowing), and homes spent a day less on market than they did a year ago,” he said. “Friday’s messy jobs print doesn’t change that story, but it does underscore that labor market momentum, on average, isn’t providing any outsized added support to housing demand right now.”
Krimmel added that inflation data expected next week is likely to give a better picture of the economy, particularly for consumers who remain squeezed by affordability pressures across the board.
The big picture
The uncertainty created by the war, which has pushed inflation up and rattled consumers, is still a primary factor in the trajectory of the national real estate market.
Kan said there was “no end in sight” for the war, and that related “inflationary pressures” are likely to continue through the end of the year.
Krimmel more vaguely referenced “renewed economic uncertainty” as a headwind for housing.
Krimmel was also joined by National Association of Realtors® Chief Economist Lawrence Yun in highlighting unemployment as a potentially deceptive indicator in the data this month. According to the BLS, the overall unemployment rate fell to 4.1%, but labor force participation fell 0.1% as well.
“That headline drop might be masking an underlying slowdown,” Krimmel said.
Yun called the tight labor market “concerning,” and claimed that “too many Americans are not even searching for a job.”
“With the southern border crossings effectively shut down and legal immigration at near historic lows, more Americans need to step into the job market,” Yun said.
