The positives in the BLS November Employment Situation released Friday prompted one analyst to declare that the economy is “running largely at full steam” and another called the economy “stable and strengthening. One analyst commented that the report was a “mixed bag” while another called it “unremarkable.” Still another said the economy “appears to be stable and strengthening.”
Job gains totaled 178,000 for November and the unemployment rate fell by 30 basis points down to 4.6 percent, its lowest level since August 2007. Still, the report had its low points—namely, a 3-cent decline in wage growth over-the-month (down to $25.89) after gaining 18 cents over the previous two months, and a labor force participation rate (62.7 percent) stagnating near a four-decade low.
Nearly all of them agreed, however, that the report did nothing to discourage a rate hike by the Fed later this month.
“November was a bit of a mixed bag as far as jobs were concerned. While the headline figure for job growth is a positive, both labor force participation and wage growth declined,” said Curt Long, Chief Economist with the National Association of Federal Credit Unions. “Still, the report provided no impediments for a rate hike from the Fed later this month, and a quarter-point increase is now a certainty.”
An increase in the federal funds target rate may not mean good news for the housing market, however. Mortgage rates have already spiked by 51 basis points since the presidential election and are at their highest level in 16 months.
“The good news: the economy appears to be stable and strengthening,” realtor.com Chief Economist Jonathan Smoke said. “The bad news: rising rates could pose a challenge to many homebuyers, especially first-time buyers who now represent more than half of the potential buying pool. The key question for the months ahead is whether the demand created by more jobs and wage growth will be enough to offset the affordability and qualification challenge posed by higher rates. Mortgage rates have already moved in that direction, surging higher than we have seen in two years.”
Fannie Mae Chief Economist Doug Duncan stated, “Today’s Labor Department employment report was unremarkable, suggesting a small Federal Reserve rate hike will occur—as the market expected—in December. Some attention will be paid to the drop in the unemployment rate to 4.6 percent, but that is driven by the combination of jobs added and a decline in workforce participation, the latter of which was disappointing. The income growth number dropped back, thus easing Fed concerns about compensation as a driver of inflation through tight labor markets. Professional services showed broad-based employment growth, and state government employment made a healthy contribution. Manufacturing employment, currently featured in many headlines, showed a fourth consecutive month of minor employment declines, but housing more than offset that with a third consecutive month of healthy job growth. Housing supply growth continues to grind upward adding to economic growth. In sum, there’s no reason to believe that the pace of future rate hikes will pick up based on this release.”
Zillow Chief Economist Svenja Gudell noted that “the report shows an economy running largely at full steam, with the unemployment rate—already low—falling to its lowest level since August 2007,” and that some of the largest job gains occurred among residential constructors and developers, which could bode well for housing.
“Residential construction employment rose 4.9 percent from a year ago, continuing recent strength, though some of the bump is likely attributable to re-building efforts in the Southeast after Hurricane Matthew,” Gudell said. “Over the past three months, the construction industry overall has added 59,000 jobs, largely in residential construction. Continued hiring in this sector could be a good sign for home buyers struggling with incredibly tight inventory, and a continued ramp up in home construction activity will only help alleviate the problem as we move past the holidays and into 2017.”