Editorial|&utm_term=|Website-Editorial-NAT(Website)|"> Auction.com. Muoio says the Bureau of Labor Statistics' December employment-situation report showed a mixed bag of high job growth with little wage improvement, which is a concern for economists.

“December saw 252,000 jobs added, beating expectations. Additionally, November's huge gain was revised even higher and now shows 353,000 jobs added in the month. Payrolls added an average of 246,000 jobs per month this year, the highest figure during the cycle. However, wage growth disappointed and is viewed by us as the crucial ingredient for the housing market and next leg of economic growth.”

Muoio also points out the strong job gains and a slip in labor force participation brought unemployment to its lowest level since June 2009. “December unemployment measured 5.6%, 20 basis points lower than the month prior and 110 basis points lower than a year ago. Labor-force participation, however, slipped 10 basis points to 62.7%, matching its low for the cycle. While payroll gains and falling unemployment have diminished slack in the labor market, some still remains.”

Average hourly earnings failed to gain traction, falling 0.2% in the month and growing just 1.7% from a year ago, their slowest annual growth rate since October 2012. “The housing market and retailers are desperately awaiting wage growth to generate the next leg of demand,” says Muoio. “This remains elusive and could point to another fairly stagnant year in housing as affordability remains handicapped by price gains and minimal wage gains fails to alleviate the situation. Several states increased minimum wage in January, but it is not clear that this will help kickstart the process.”

Muoio also says that oil and gas extraction continues to show growth, but it's unclear for how long as several companies have affirmed cuts to capital expenditures and drillings, which will result in layoffs across the sector. And the tailwind generated by the fracking boom is going slack, resulting in slower growth in Texas, Oklahoma, North Dakota and other energy-sensitive areas.

In addition, temporary-help services and employment services were among the top-performing sectors once again, which continues to constrain wage growth and is less likely to spur stronger leasing than permanent jobs.

However, construction remains volatile, Muoio says, with residential construction employment remaining 7% higher than a year ago. “We expect the multifamily boom to drive growth in the sector in the coming year, particularly in Austin and other markets expecting high supply additions.”

Also, healthcare continues its steady expansion, with its components seeing payroll growth between 0.5% and 1.5% in the fourth quarter. Medical office and “doc in a box” retail locations will benefit from this growth, with the latter being a bright spot for retail absorption, says Muoio.

Meanwhile, the public sector remains neutral with regard to employment, a drag on the Washington, DC, area in particular, since it derives much of its growth from the government sector and spending. Muoio says, “This will constrain office absorption in the metro and with population growth slowing in tandem will likely slow apartment demand.”

As GlobeSt.com reported in December 2014, Auction.com's senior associate and economist Peter Muoio's reaction to the encourage employment figures of the previous month were: “The fundamental turning point, if you will, that we've been talking about throughout 2014 was a reduction in the level of uncertainty. People may think of this as sort of touchy-feely and anecdotal, but there's actually an index we follow that's published by academic economists that showed a break in uncertainty at the beginning of 2013. We're now back down to the level of historical run rate for this country in uncertainty, which makes a difference when it comes to businesses investing and hiring and households making bigger purchases. So, the level of uncertainty is a key one. The natural reaction we all have when we're uncertain is to freeze in place and not do anything, so improvement in the uncertainty level and confidence—which are two sides of the same thing—has been a big factor in firms starting to pick up hiring.”

Instant Insights /

Wage Growth Crucial for Economic Growth

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