The March employment report showed a boost of 4,200 mortgage jobs and surpassed analyst expectations by growing at the fastest pace in four years. In its latest labor report, the Bureau of Labor Statistics said that the non-seasonally adjusted number of mortgage-related jobs totaled 436,700 in February, compared to 432,500 a month earlier. In February 2003, the total was 421,300.

Employment numbers are reported about 30 days following the end of each month.

The latest mortgage-related employment figure was composed of 315,500 people working in Real Estate Credit and 121,200 mortgage and nonmortgage brokers, the Bureau said.

Meanwhile, employment across all sectors of the economy rose almost three times the increase expected by analysts to the fastest pace in four years. According to the Bureau, an additional 308,000 payroll jobs were created in March, which is the largest gain since April 2000. The Bureau, which is a division of the U.S. Department of Labor, said the job growth was fairly widespread, with construction employment rising sharply and additions in several major service-providing industries.

Doug Duncan, chief economist of the Mortgage Bankers Association of America, was one who expected a lower level of job growth, he told MortgageDaily.com in a phone interview Thursday. Duncan said payroll jobs have grown at an average of about 57,000 per month and that although signs pointed to a strong increase, the March labor report would probably only show 100,000 additional payroll jobs due to high levels of productivity gains.

However, the mortgage industry economist did point out that the bond market would react if there was an increase of at least 175,000 jobs. In line with his prediction, the 10-year Treasury note was trading at a yield of 4.15% Friday Afternoon, up a whopping 27 basis points from Thursday.

In an e-mailed statement to MortgageDaily.com, Freddie Mac said its chief economist, Frank Nothaft, expected payroll job growth at around 120,000. With a higher than expected result in the labor market, Freddie said mortgage rates will increase to 5.7% or 5.8% within a week. However, the mortgage giant said the Federal Reserve, which has kept the federal funds rate at 1% for some time now, will not move yet since it will wait to see how the job growth figures are revised next month.

Speculation of a strong employment report already boosted mortgage rates, according to Freddie, which said the average for the 30-year increased 12 basis points from last week to 5.52% this week. Meanwhile, mortgage application activity already showed signs of contraction.

Duncan said higher mortgage rates will eventually cause a decrease in business and spark layoffs. In reviewing four previous refinance cycles, the economist said mortgage employment typically fell between 15% to 18% from its peak. In the most recent refinance cycle, this would translate to approximately 65,000 layoffs occurring from the peak in mortgage employment (reached in July, when the number was 457,600) to the end of 2004.

A total of 100,000 mortgage layoffs are expected by the end of 2005, Duncan added. From July to this January, about 25,000 layoffs have been reported, according to MBA.