Strong Jobs Report Muddles Economic Picture and Makes Interest Rate Hike by Fed Possible
Job growth in September was much stronger than analysts had predicted, indicating that the U.S. economy continues to grow despite higher interest rates, labor unrest and dysfunction in the nation’s capital.
CNBC reports that nonfarm payrolls increased by 336,000 for the month, better than the Dow Jones consensus estimate for 170,000, the Labor Department announced earlier today. The unemployment rate was 3.8%, compared to the forecast for 3.7%. NAR Chief Economist Lawrence Yun released the following statement in response to the jobs report. “The job market continues to crank out jobs in high figures: 336,000 in September and over 4 million more compared to pre-COVID-19 March 2020. It does not mean all is well. The jobs data, however, is considered a lagging indicator as the firms will only make a job cuts decision after having cut costs in other areas,” he said.
Yun continued, “Commercial real estate, in particular, is flashing warning signs. Net leasing on retail and warehouse spaces is slowing. The office sector is continuing to bleed with rising vacancy rates. Community banks, many with exposures to commercial real estate, are watching their balance sheets carefully. The fast-rising interest rates are breaking several sectors of the economy. The remaining sectors will also likely crack if the rate hikes continue. Given that the inflation rate is already cooling, the Fed needs to stop raising rates and strongly consider cutting interest rates next year. That would be the soft landing without the net job cuts to the economy.