Reduced Uncertainty Spurs Strong Job Numbers

Editorial|&utm_term=|Website-Editorial-NAT(Website)|"> Auction.com Research's senior associate and economist Chris Muoio made some statements about the retail, construction, healthcare and other sectors. We spoke with Peter Muoio, senior economist for Auction.com, about what led to the strong employment numbers and what he sees happening with job growth in 2015, as well as his views on the different sectors.

GlobeSt.com: What do you believe led to the strong employment numbers in November?

Muoio: 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.

GlobeSt.com: Do you see this momentum continuing through 2015?

Muoio: Our baseline is it will continue into 2015 as there remains a better level of uncertainty. After the election, there were some initial things like the fear of the government shutting down, which upset investors. But cooler minds prevailed and we saw no harm coming out of Washington, which is keeping the economy on an even keel and allowing investing to continue. It's a virtual cycle: energy prices have come down, and although this is not necessarily good for the oil industry, it's a positive for the economy and it's a huge bonus to consumers and businesses in terms of energy costs. It's a really nice time for this—winter is coming and the holiday shopping season is in progress, so we see it as a positive going into 2015. Hiring leads people to feeling better about the economy. There's more money in their pockets, they spend more and increased demand leads to more hiring. It looks like at the moment positive things are finally leading to other positive things, and we're really starting to enjoy that.

GlobeSt.com: Do you anticipate non-residential construction to begin picking up again?

Muoio: I think it's going to be a slow, modest pick-up. We saw some increase throughout 2014; there was construction related to leasing in the office and retail spaces, with construction on the interior. Then the big Megillah is building new buildings, which is going to be a slower thing to develop over the next few years. The industry needs vacancies to come down in office and retail, and we expect that to start happening over the next few years. It's going to be a longer haul on the commercial side. On the residential side, even though multifamily is the smaller piece, the increase in apartment construction has been an important ingredient, and now it's been supported as well by the single-family housing recovery, which is beginning to feed into single-family starts.

GlobeSt.com: Shifting gears to healthcare, which Chris talked about, which geographic areas are benefiting the most from the strength of the healthcare sector?

Muoio: There are certain metros where healthcare is a driving industry. The way you think of auto as a growth engine for Detroit or finance as a growth engine for New York, there are certain markets where healthcare is a very important driving industry. It's not just the people in the area getting sick, but it refers to specialty care in those markets. Nashville is doing well because of the large healthcare industry, and so are Raleigh-Durham, NC; Cleveland; Minnesota; Houston; New York; and Boston. Those are some of the key markets that come to mind as major healthcare centers. It's related to a whole infrastructure of medical schools, residency programs and hospitals in these markets. They're major health centers.