Home appreciation is still strong!

Job Growth and Unemployment Rate not so much.
September 23, 2022

The Bureau of Labor Statistics (BLS) released its Jobs Report for July, showing that there were 528,000 jobs created, more than double the expectations. There were also positive revisions to the data for May and June adding 28,000 additional jobs in those months combined. With these numbers, the Unemployment Rate declined from 3.6% to 3.5%.

Sounds great, right? Let's take a deeper look...

The BLS Jobs Report consists of two different reports - the Household Survey, where the Unemployment Rate comes from, and the Business Survey, where the headline job number comes from. The Household Survey also has a job loss/creation component to it and it showed that there were only 179,000 new jobs created, which is very different from the 528,000 reported.

And although the headline unemployment rate decreased, it's important to note that this figure removes people who are not actively searching for a job, of which there were nearly 6 million people. The U-6 All-In Unemployment Rate, which adds back all these individuals and is more indicative of the true unemployment rate, remained at 6.7%.

The increase in jobs combined with the decline in GDP that we have seen speaks to a lack of productivity, where more employees are being hired but fewer goods are being produced. This can add to the inflation pressures we are already experiencing.

Now, let's factor in the Initial Jobless Claims.

While we have not seen major increases in Initial Claims each week, they have been consistently moving higher. Continuing Claims, or people who continue to receive benefits after their initial claim is filed, rose by 48,000 to 1.416 million. In addition, the Job Openings and Labor Turnover (JOLTS) report showed the number of hirings fell for a fourth straight month, and that job openings fell by 600,000 to 10.7 million in June.

Unfortunately, this upward trajectory is likely to continue, given the announcements of significant layoffs from several public companies, which means we will eventually see a higher unemployment rate. This report may be the “canary in the coal mine” signaling that the job market is starting to soften.

So, here is something interesting to think about. There are just under 11 million jobs available in the United States and there are about 6 million people in the labor force who are not looking for work. Many things factor into this - location, industry, and reason for filing to name a few.

In contrast to the information above, CoreLogic released some positive news. Their Home Price Index report for June showed that home prices rose by 0.6% from May and 18.3% on a year-over-year basis. Although this annual reading declined from 20.2% in May, it is still robust. CoreLogic forecasts that home prices will appreciate 0.6% in July and a total of 4.3% in the year going forward.

Remember, even 4% appreciation can still be meaningful for wealth creation. For example, if someone bought a $400,000 home and put 10% down, that means they would gain $16,000 in appreciation over the next year and earn a total of 40% return on their investment.

Looking ahead, inflation data will be reported later today in the July Consumer Price Index and tomorrow in the July Producer Price Index (measuring wholesale inflation). The latest Jobless Claim data will be reported on Thursday. Stay tuned, we'll be breaking these numbers down for you next week.

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