America’s job growth slowed down in January after months of robust gains, according to the latest report shared by the Bureau of Labor Statistics (BLS), which experts called “a mixed bag” for the U.S. housing market.

Why It Matters

There is a strong correlation between the housing and the job markets: lower unemployment rates are generally linked to an increase in housing demand, as workers have more home-buying power. While the U.S. job market has been strong in the past few years and unemployment low, home prices appreciated faster than wages, eroding Americans’ purchasing power.

According to the January job report, wages are now rising faster than inflation, with the average hourly earnings up 4.1 percent year-over-year. In December, headline inflation was 2.9 percent.

What to Know

In January, the economy added 143,000 jobs, according to the latest BLS data—slightly below experts’ expectations of an additional 170,000 jobs. At the same time, the unemployment rate dipped to the lowest level since May 2024.

“The number of unemployed declined by 35,000 in January, bringing the unemployment rate down to 4 percent,” National Association of Realtors’ (NAR) chief economist Lawrence Yun said in a statement shared with Newsweek. A month earlier, the unemployment rate was 4.1 percent.

According to real-estate agency Bright MLS‘ chief economist Lisa Sturtevant, recent data shows that the U.S. labor market “is on solid footing to begin 2025.” While there have been some signs of cooling labor market conditions, she said, such as fewer job openings, “the U.S. economy remained resilient to start the year,” Sturtevant said in a statement shared with Newsweek.

“Job growth may have come in lower than predicted because of the impacts of winter storms in the East and South, as well as the wildfires in Los Angeles. The unemployment rate fell to 4 percent,” she explained.

“The biggest gains were in retail, healthcare and professional, scientific and technical services sectors, while job growth in the manufacturing and construction sectors was more tepid,” she added.

What Does This Mean for the Housing Market?

While the latest job market report was generally positive for the U.S. economy, “it actually offers up a mixed bag for the housing market,” Sturtevant said.

“With more jobs being added in relatively high-wage sectors, and overall earnings on the rise, prospective homebuyers will feel more confident heading into the spring housing market,” she added.

“However, with employers still adding jobs at a healthy pace and inflation above the Federal Reserve’s 2 percent target, the central bank is likely to keep interest rates unchanged at its meeting in March, which means mortgage rates could remain in the high 6-percent range heading into spring,” she explained.

The central bank has previously indicated that it would need to see real inflation progress or weakness in the labor market before delivering new rate cuts. The latest job market report contained neither—suggesting that the Fed will not cut its key rate in March, and mortgage rates will likely remain high.

It was “not the jobs report homebuyers were looking for,” Sam Williamson, senior economist for financial services company First American, said in a statement shared with Mortgage Orb.

“Borrowing costs, including mortgage rates, are likely to stay elevated for an extended period, reducing the potential for a strong housing market rebound in the spring,” he explained. “Overall, mortgage rates are expected to drift modestly lower to the mid-to-low 6-percent range by year-end, though unexpected labor market or economic downturns could cause rates to fall more quickly.”

Redfin economist Chen Zhao wrote that mortgage rates “may see a little bounce” off the latest job report, “but not as much, as the Fed will continue to be expected to hold cuts until mid-year.”

She wrote: “With a still strong labor market, inflation just above target, and much White House policy uncertainty, the Fed is unlikely to signal further rate cuts before May or June. While mortgage rates have fallen slightly in recent weeks, they are likely to remain high and at risk of significant volatility.”

On another note, rising wages and growing employment could be positive news for the construction sector, which experts fear might be dramatically hit by Donald Trump‘s mass deportations of immigrants.

Migrant workers represent a significant portion of those employed in the construction sector: according to the most recent American Community Survey, the share of immigrants in construction was 25.5 percent in 2023, up from 24.7 percent the year before—the highest percentage on record.

According to the latest report, the construction industry gained 4,000 jobs month-over-month in January, with residential construction adding 1,900 jobs. On the other hand, the number of residential specialty trade contractors dipped by 2,100 compared to December 2024.

“The construction industry needs workers, who are paid $39.07 per hour, compared to $22 in hotels and $25 in retail trade,” Yun said. “The impact of the worker shortage due to deportation can be alleviated if combined with boosting temporary work visas and getting more Americans into trade schools,” he added.