Job growth didn’t meet expectations for the month of December, as COVID-19 cases surged due to the highly infectious Omicron variant. According to the latest data from the Bureau of Labor Statistics, nonfarm payrolls increased by 199,000 and unemployment fell to 3.9%. However, this is behind the Dow Jones estimate of 422,000 for payroll for the month of December.
Construction, however, is one of the areas that continued to see an upward trend in jobs, though mainly in the nonresidential sector and not in housing. While still 88,000 below its February 2020 level, construction employment increased by 22,000 in December, with nonresidential specialty trade contractor jobs up 13,000 and heavy and civil engineering construction jobs up 10k.
What the industry is saying:
According to Mortgage Bankers Association (MBA) SVP and Chief Economist Mike Fratantoni, two numbers stood out in the jobs report.
“Job growth averaged 537,000 in 2021. Although waxing and waning of the pandemic and unusual seasonal patterns led to some month-to-month volatility in job growth, the pace of recovery overall in the job market has been remarkable,” he said in a statement.
“The unemployment rate is now at 3.9%. The economy is at full employment. Although the labor force participation rate is lower than it was pre-pandemic, it is not moving much right now, suggesting that the unemployment rate will continue to drop in 2022, even if the faster wage growth eventually does bring more workers into the labor force,” added Fratantoni. “A broader measure of underemployment, the U-6, showed an even bigger drop than the headline measure. Average hourly earnings are up 4.7% over the last year.”
According to Fratantoni, the jobs market remains tight and businesses continue to face challenges in filling the nearly 11 million job positions available, even amid wage increases.
“MBA forecasts that the unemployment rate will decrease to 3.5% by the end of 2022, which is in line with recent Federal Reserve projections and would support a more rapid normalization of interest rates this year,” he said.
According to Dr. Lawrence Yun, chief economist for the National Association of REALTORS®, there’s a disparity between the jobs report and company payroll data, which saw a gain of only 199,000 net new jobs.
“The difference is likely due to more Americans wanting to be self-employed. REALTOR® membership, for example, is at a record high. Compared to the peak employment prior to the pandemic, however, there are 3 million fewer Americans working,” he said in a statement.
“‘Help Wanted’ signs seem to be everywhere as there are 10.6 million job openings. That is much higher than the figures for unemployed Americans in search of a job at 6.3 million,” added Yun. “The wage rate is showing an accelerating trend, with a 6% annualized gain in the fourth quarter of last year, up from 5% in the third quarter, and up from 2% to 3% before the onset of the pandemic. Higher wages could feed into higher consumer price inflation, which in turn will lead to higher mortgage rates as lenders need to compensate for the loss in value of the purchasing power of money.”
Realtor.com® Chief Economist Danielle Hale stated we are at a stage of the economic cycle where this positive gain in jobs, even though they did not meet predictions, could lead to concerns of “a faster Fed pullback in monetary policy, or higher rates.” However, for real estate, the picture remains optimistic.
“Despite market worries and already climbing mortgage rates, today’s jobs report is good news for potential homebuyers and sellers. It signals economic strength that will not only boost consumer confidence, it’s also likely to lead to extra buying power that will help offset higher housing costs,” added Hale.
Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to lizd@rismedia.com.
