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Jobs Beat Expectations — What It Means for CRE

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Jobs Beat Expectations — What It Means for CRE

Even with 227,000 new jobs in November — it was above the Dow Jones compiled estimate of 214,000. The jobs report saw a slight uptick in the unemployment rate to 4.2%. Chances seem good that the Federal Reserve’s FOMC will cut the federal funds rate by another 25 basis points. But to look further ahead means a deeper examination of the data.

“The report might seem like all is rosy, yet our real-time data is showing a split screen moment in the labor market between short-term outlook and long-term changes,” wrote Becky Frankiewicz, president of ManpowerGroup North America and chief commercial officer, in an email note. “Short-term, real-time hiring is cooling, it is taking longer to fill roles, from 39 to 49 days as employers hold out for the perfect fit or pause on making decisions. Those with specialist skills will find themselves in strong demand, others might not recognize their reality in this report.”

Numbers for employment for September and October were revised upwards: from 223,000 to 255,000 in September and from 12,000 to 36,000 in October.

For November, Healthcare added 54,000 jobs. Leisure and hospitality was up 53,000; however, retail trade lost 28,000 and this was in the run-up to the end of the holiday season. Government at all levels had a 33,000 increase. There is an overall cooling.

“Although payroll employment rebounded in November with a gain of 227,000 jobs, and the prior months were revised upwards by a cumulative 56,000 jobs, the report overall shows more softening in the labor market,” wrote MBA SVP and chief economist Mike Fratantoni, in prepared remarks. “The unemployment rate is now above 4.2%, the household survey again showed a large drop in employment, and more households reported spells of long-term unemployment. Per the JOLTS results from October, the hiring rate continues to decline. While we are not seeing a pickup in layoffs, new entrants and individuals who lose jobs are having a more difficult time regaining employment.”

“Given the large weather and strike impact in October, [it is] best to average the two months together to get a truer reading of employment growth, and the two-month average of 132,000 is soft and down significantly from the monthly average of 186,000 in prior 12 months,” wrote nationwide chief economist Kathy Bostjancic in an email note. “The sluggish and narrowly based employment growth concentrated in mostly non-cyclical sectors supports our call that the Fed cuts rates by another 25bps on December 18 — absent a surprisingly rapid rise in CPI in November.”

Average hourly earnings were up 4% year-over-year, which is significantly above the Fed’s target inflation rate and some would think that to be potentially inflationary. That said, an average view doesn’t provide a view of distribution. Wages have been growing far faster than inflation at the 75th percentile compared with median wages at the 25th percentile, which are losing about 5% buying power annually, according to a GlobeSt.com analysis of data from the Federal Reserve Bank of Atlanta. The danger of the trend is that a concentration of buying power at the top doesn’t help the necessary broad-based consumer purchasing that is about 69% of GDP.

What happens after the December meeting is far from obvious.

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