Though higher rates were reducing volume, May was the 21st consecutive month of rising employment in the mortgage industry.

Bureau of Labor Statistics data show employment in the industry at a record 373,000, up from 370,000 in April, 360,000 at yearend, and 319,000 in May 1998.

"There is a lag in the market between the time that things start to slow down and the time when lenders realize that things have slowed and decide to cut staff," said Brian Carey, an economist at the Mortgage Bankers Association said.

"There is probably a two-month lag between applications starting to drop off now that interest rates have increased. For the next two months, lenders are going to need their back-office staff to help close loans for people who walked in before the rates rose."

Mr. Carey said that employment numbers do not fully reflect the volume of business last year.

"People were working above capacity during the boom-extra hours and so forth," Mr. Carey said. "The productivity was so high last year that a slowdown may just be time to come back to a normal level and let employees catch their breath. So there's really no need to cut staff."

Mr. Carey said that hiring is likely to be in operations, sales, or processing, not for senior management jobs.

In the refinancing boom that started late in 1992, employment did not peak until March 1994, at 271,000. And it fell in just the next three months to 198,000-a 73,000-person drop.

This time around, Mr. Carey said, the decline will be only a quarter as large.

"Interest rates rose 2 points in that (earlier) period," Mr. Carey said. "We've only seen rates rise about half a point."

According to Freddie Mac, the average interest rate for a 30-year fixed- rate mortgage was 7.41% in the week that ended June 5, up from 7.23% a week earlier and 7.05% a year earlier.

"Loan officer volume is obviously going to go down, which is going to decrease the demand for back-office staff and for the personnel that put the loan packages together," Mr. Carey said.

"Servicing staff should stay pretty stable though, which could also be driving up the employment numbers."

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