Housing industry economists had mixed views of today’s data report from the U.S. Department of Labor that found the economy added more jobs than anticipated.
During May, nonfarm payrolls expanded by 272,000, up from 165,000 in April and higher than a Dow Jones consensus estimate of 190,000. But despite the increase in jobs, the unemployment rate rose to 4% – a level that it has not reached since January 2022.
First American Deputy Chief Economist Odeta Kushi considered how the Federal Reserve would process the data when it meets next week to determine the status of interest rates.
“From the Fed’s perspective, this is a mixed report,” Kushi said. “Strong job and wage growth could keep inflation concerns high. However, the uptick in the unemployment rate may offset those worries. Additionally, other labor market reports, such as the JOLTS report, indicate a still strong, but gradually easing labor market. Notably, the ratio between the number of job openings and unemployed people decreased to 1.24, just above pre-pandemic levels. Ultimately, today’s jobs report alone is unlikely to shift the Fed’s stance. The Fed will likely remain in a holding pattern, waiting for more data.”
Kushi also observed the addition of 21,000 construction jobs last month, with a nearly 3% uptick in residential construction jobs from one year ago.
“Builders continue to grapple with challenges stemming from the ‘five Ls’: labor, lots, legal issues, lumber, and lending,” she stated. “It’s good to see continued progress on the skilled labor shortage. You need more hammers at work to build more homes, and there are a lot of homes under construction right now.”
National Association of Realtors Chief Economist Lawrence Yun declared that “job additions are continuing at a healthy clip” while adding that “wage growth of 4.1% is respectable and better than the 3.4% consumer price inflation.” But Yun warned the general public is not embracing the data as a sign of good times ahead.
“Americans, however, have not shown recognition, according to many polls, of an improving economy, which no doubt is due to the fact that the cumulative rise in consumer prices is still higher than the cumulative wage gain of the past four years,” he said. “Payroll data is considered much more reliable than household survey data. That is why Wall Street is expecting a further delay in the Fed’s interest rate cut. The mortgage rate looks to be stuck at near 7% average for at least another month.”
Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, echoed Yun’s sentiments.
“Although this report is not uniformly strong, on net, it is showing a job market that is still quite tight, which likely means that the Federal Reserve will continue to hold at its current level of rates, as inflation is unlikely to drop back to target given this pace of wage growth. MBA is forecasting a first rate cut in September of this year,” he said.
Fratantoni called attention to the uneven nature of job growth by detailing how “job gains continue to be concentrated in the service sector, particularly healthcare and leisure and hospitality.” Dr. Anthony B. Sanders, chief economist at Artesia Economics, highlighted another imbalance, noting that “native-born workers lost 463,000 jobs while foreign-born gained 414,000 jobs.” He blamed the situation on President Biden’s immigration policies.
“The theme song for the Biden administration should be ‘South of the Border,” he said. “Biden’s open borders policies are like something out of the book/film ‘Gangs of New York.’ This time it isn’t Irish immigrants that are rioting/looting, it is illegal immigrants from Latin America, China, and the Middle East essentially replacing native-born workers with foreign-born workers. Since Covid, the growth in foreign-born workers have blown away the growth in native-born workers. So much so that since 2019, native-born workers have actually lost jobs while foreign-born workers have surged.”
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