Jobs Report Thumbs Its Nose at Inflation Concerns

November was yet another healthier-than-expected month for jobs creation. The 263,000 additional nonfarm payroll jobs were well below the 12-month average of 408,000 and the 24-month average of 456,000, but it was also significantly above the 200,000 that economists had expected. The unemployment rate remained at 3.7% and has been in the 3.5-to-3.7% range since March.

Before anything else someone in CRE might consider, it means more fuel for the Federal Reserve to keep pressing interest rates upward, making financing costs even more expensive than they have been. And they’ve already been high enough to begin the conditions for a new distressed market.

The big contributors to growth last month were hospitality, healthcare, and government, with retail trade and transportation and warehousing losing jobs.

Construction was up 20,000, with nonresidential construction taking 8,000 of those jobs.

There were some questionable signs for CRE. Of those retail jobs, employment at general merchandise stores dropped by 32,000, with electronics and appliance stores losing 4,000, and furniture and home furnishings stores jettisoning 3,000. Offsetting those drops were a gain of 10,000 in motor vehicles and parts dealers. But still, while not always true, November tends to be a month of adding help at stores for the holiday sales season. Ongoing weakness could portend a problem with retail that landlords might follow.

Another trend for CRE professionals to watch is a decline in transportation and warehousing — a proxy for the important industrial sector — that’s seen a decline of 38,000 since July, 15,000 of those gone last month; 13,000 of November’s losses were in warehousing and storage. Another sector that, even more than retail stores, tends to build employment going into and through the fall, according to a GlobeSt.com review of government data.

“With 263,000 jobs added in November and unemployment remaining at 3.7%, this phenomenal labor market is showing little sign of slowdown,” noted Becky Frankiewicz, President and Chief Commercial Officer of ManpowerGroup, in an emailed comment. “Today, there are still 1.5 jobs for every person looking for work and we’re still three million short of what we need for full employment.” She added, “Despite recurring headlines of deep cutbacks — primarily in tech — other sectors have scaled up; and while we’ve been bracing for a downturn, the broader labor market has barely flinched.”

Frankiewicz says that the economy needs to close the gap. But the Fed still sees a brisk labor market as a driving force for inflation and reason to lift interest levels ever higher. Chairman Jerome Powell may have signaled on Wednesday lower hikes, he and other officials have been clear that they don’t see conditions as right for taking the pressure off. The November jobs report is just more grist for the mill.