March 11, 2025 – Will Government Layoffs Affect the Job Market?

Economic Commentary

The Administration has put their plans in place to eliminate tens of thousands of Federal employees. As the February jobs report was just released last week, we must start to ponder if these layoffs will affect the overall jobs market.  If the private sector is strong enough, those unemployed could be absorbed into corporate positions. On the other hand, if the overall jobs market is already weakening, this could be adding fuel to the fire.

We did not expect that the January report would be affected greatly by the government layoffs. However, it does give us a picture of how strong the private jobs sector is at the present time, especially considering the weaker than expected report for January.  Plus, the elimination of government contracts will also affect the private sector.  So how did we do?  In February, the economy added 151,000 jobs, slightly short of forecasts. In addition, the previous two months of reports showed almost no change after revisions. The unemployment rate rose slightly to 4.1% from 4.0% in January.  Overall, this paints a picture of a slowing but steady jobs picture. 

Also important is the measure of wage growth for the month, which is a significant ingredient of inflation. Wages grew by 3.0% on a monthly basis and 4.0% year-over year – right on target.  These inflation numbers pick up even more significance because any evidence of an employment growth slowdown fueled by government layoffs would normally be accompanied by lower interest rates from the Federal Reserve. But the Fed is also worried about the reignition of inflation and thus may not react as strongly to a possible slowdown in hiring.

Weekly Interest Rate Overview

The Markets. The Freddie Mac rate survey indicated that mortgage rates hit their lowest level since mid-December. According to the survey, 30-year fixed rates decreased to 6.63% from 6.76% the week before. In addition, 15-year loans fell to 5.79%. A year ago, 30-year fixed rates averaged 6.88%, 0.25% higher than today. “As the spring homebuying season gets underway, the 30-year fixed-rate mortgage saw the largest weekly decline since mid-September. The decline in rates increases prospective homebuyers’ purchasing power and should provide a strong incentive to make a move. Additionally, this decline in rates is already providing some existing homeowners the opportunity to refinance. In fact, the refinance share of market mortgage applications released this week reached nearly 44%, the highest since mid-December.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

Last summer, rule changes from the National Association of Realtors, the powerful real estate trade organization, threatened to upend the way Americans buy and sell homes. Some experts predicted the 6% commission, the unofficial fee for buying or selling a home, would be finished. Now as the 2025 spring homebuying season kicks off and the turbulence caused by the new rules has faded, real estate professionals say the actual effects have been muted. “Paperwork has changed, and I think some really good things have happened in the way most of us discuss commissions upfront with our buyers and sellers,” said Brita Kleingartner, a Realtor in Los Angeles. “But I don’t think that business has changed in any way.” Last year, TD Cowen Insights estimated that the new rules could cause fees paid to Realtors to fall by 25% to 50%.  Instead, commissions have remained largely unchanged since August, according to a study released by real estate platform Redfin.  Home sellers mostly still offer to pay commissions, Realtors who spoke to CNN said. “One thing is certain, if the intention was for sellers not to be paying buyers agents’ compensation, that’s a total fail,” said Summer Goralik, a real estate compliance consultant. “It’s continuing as is and just being repackaged in a different way.” The first change required all agents working with a prospective home shopper to enter into a written agreement before touring a property together. The contract is designed to inform buyers that they are responsible for paying their own Realtors if a seller chooses not to cover that cost. “Now we’re kind of forced to have that discussion maybe sooner on in your relationship with a buyer,” said Kleingartner, the Realtor from Los Angeles. “I think that has been great.”  Source: CNN

The post-pandemic trend of young adults moving out of their parents’ homes has slowed amid a housing market challenged with elevated mortgage interest rates and the worst rental affordability conditions on record. The share of adults ages 25 to 34 living with parents or parents-in-law in 2023 was 19.2% (or approximately 8.5 million people), according to NAHB analysis of the 2023 American Community Survey. Although the 2023 share of 19.2% was the second lowest since 2011, it remains elevated by historical standards. In contrast, less than 12% of young adults lived with their parents in 2000.  Looking at the numbers regionally, the elevated shares of young adults living with parents in higher cost coastal areas point to prohibitively expensive housing costs as one of the reasons for keeping young adults in parental homes. Multigenerational living, which is more prevalent among ethnic households, can also contribute to the elevated shares of young adults living with parents. This can be particularly relevant in the Southern states with higher shares of Hispanic households.  Source: NAMB

The share of older workers in the U.S. has grown significantly since the turn of the century, with 29.5% of workers in 2023 at least 65 years old, compared to 23% in 2000, according to a new report from the Employee Benefit Research Institute (EBRI). This occurred as labor force participation by older Americans between the ages of 55 and 64 has surpassed pre-pandemic levels, while the rate of those 65 and older did not change, the data suggested. “The movement of the Baby Boom generation out of the age groups younger than 65 has made the composition of the older workforce even older,” Craig Copeland, director of wealth benefits research at EBRI, said in the report. “At the same time, the older workforce is becoming more diverse, as a smaller share of White Americans comprise the ages 55 or older population. “These are important considerations for employers to understand, as older workers and a more diverse workforce calls for additional or new answers to the optimal design of employee benefit plans,” he added. Key findings of the full report include that the labor force participation rates of men ages 60 to 64 increased in 2022 and 2023 while falling among those ages 75 and older. Similar increases among women between the ages of 55 to 59 and 70 to 74 were also observed at that time, but they decreased for women in the 60-64 bracket in 2023. “After rising to its highest point since 2001, in 2022, the male share of the labor force ages 55 or older decreased in 2023,” according to the report. “The female share of the labor force ages 55 or older has generally fallen since 2010, though it did increase slightly in 2023. Despite this, females ages 55 or older are still a higher share of the labor force than they were in the late 1990s.”  Despite the increases in 2022 and 2023, labor force participation among those ages 70 to 74 did not quite reach the pre-pandemic threshold observed in 2019, the research explained. But it did surpass pre-pandemic levels last year among the 55-64 group. Source: Reverse Mortgage Daily