Executive Summary:
- Monthly job reports and anticipations over the Federal Reserve’s decision to raise interest rates have been moving in tandem in 2016. And as we approach the end of the year, anticipations are brewing over what the Fed will do about interest rates. For better or worse, today’s job report didn’t provide much insight.
- According to the U.S. Department of Labor, there were 151,000 jobs added in August, which is a continuation of healthy growth and nothing to cause excitement or concern. But if previous years are any indication, August numbers may be revised up in subsequent months. August estimates are often challenging because of education-related summer employment, and this year’s seasonal adjustments are further challenged due to changes in the timing of school calendars.
- So far this year, employment growth has averaged 190,000 new jobs per month, though not without a lot of monthly volatility.
- The national unemployment rate has been below 5 percent since April.
- As the U.S. has reached full employment, estimates suggest that only about 100,000 jobs need to be added per month to keep up with the growth in labor force.
- What does this mean for the Fed’s interest-rate decision? It is honestly very hard to tell. Experts are split, but the majority expect at least one increase before the end of the year. However, any increase will be marginal and would not likely deter consumers from purchasing a home.
- In fact, a survey of consumer confidence by The Conference Board also released this week, showed the sentiment nearing a cyclical high. Consumers are feeling optimistic about current and future expectations and are more positive about the job market. Increasingly, more consumers feel jobs are plentiful versus those who state that jobs are hard to get.
- Additionally, and most importantly for real estate market expectations, the percentage of consumers planning to buy a home within next six months continues on a steady upward trajectory (see Figure 1 below).
Figure 1
Source: The Conference Board
Selma Hepp is Pacific Union’s Chief Economist and Vice President of Business Intelligence. Her previous positions include Chief Economist at Trulia, senior economist for the California Association of Realtors, and economist and manager of public policy and homeownership at the National Association of Realtors. She holds a Master of Arts in Economics from the State University of New York (SUNY), Buffalo, and a Ph.D. in Urban and Regional Planning and Design from the University of Maryland.