Experts See Downturn in Job Momentum
January 16, 2014 | GlobeSt.com
By Carrie Rossenfeld
Despite a pick-up in nationwide job gains in the fourth quarter of 2013, December’s numbers fell short of expectation, causing experts to believe that a decline in labor-force participation is the more significant trend. The Bureau of Labor Statistics reported that 74,000 jobs were added in December, bringing the average monthly gain for the year to 182,000—similar to 2012 statistics.
Peter Muoio, senior associate and economist with Auction.com Research, says the headlines are focusing on the unemployment rate, which fell below 7% to 6.7% during December, rather than the labor-force participation rate. “This brings unemployment close to the 6.5% level the Fed has noted as a point to start raising interest rates, but the composition of this decline will give the Fed pause. The fall in unemployment was caused by a nose-dive in labor-force participation.”
After ticking higher last month, labor-force participation fell once again to its cyclical lows of 62.8% in December, Muoio adds. “While some in the media pin this on retirement and demographics, which certainly plays a minor role, the fact remains that declining labor-force participation points to a weaker economy and labor market than the headline figures indicate.”
As GlobeSt.com reported last week, Rick Sharga, EVP of Auction.com, said he believes the unemployment rates are a bit misleading since many among the unemployed are no longer looking for work. “A lot of people have voted themselves off the island and have taken themselves out of the labor pool. I’m watching labor-participation rates more than unemployment rates. Until we see ongoing creation of full-time, good-paying jobs, we’re not going to see housing coming back.”
Sharga added that one of the biggest problems in the unemployment realm is that 25- to 30-year-olds are continuing to have a stubbornly high unemployment and underemployment rates. “These should be first-time homebuyers to stimulate the whole ecosystem. I don’t see where we would get a significant boost to economic growth in 2014. It’s more likely we’ll continue to see a modest recovery, but at least it’s heading in the right direction, where we’ve been for the last couple of years. The economy, like housing, is finding its way out of the deep hole it carved for itself a few years ago.”
The employment picture appeared to be brightening in California during December 2013. Beacon Economics reported last month that California added another 44,300 nonfarm jobs in November, representing an increase over the revised 30,100 jobs added in October. November’s gains represented 21.8% of all jobs added across the nation for the month.
This rise in nonfarm payrolls was a sign that the survey-based figures were catching up to reality as the benchmark tracking has shown significantly higher number for job growth throughout 2013, Beacon reported. November’s additions to nonfarm payrolls marked a 1.6% increase over November 2012. Growth in nonfarm payroll is still trailing year-over-year growth in household employment, which came in at 1.8%.
Beacon also reported last month that the retail trade industry led California’s job gains, adding 22,500 new positions to company payrolls, a 1.4% increase in just one month. It is important to note that these jobs gains are on a seasonally adjusted basis and already accounted for companies bringing on workers for the holiday season.
Also encouraging is that upper-level hiring in the real estate industry is on the rise, according to Sayres Dudley, EVP in the Dallas office of global search firm DHR International. “I am encouraged particularly in the real estate industry that reasonably robust hiring is back, particularly in the states where you had the most growth. There’s no question that that is happening, and it is happening across almost all sectors.”
Dudley says that the real litmus test that the real estate industry is hiring is that development companies are adding new people and expanding spec development. “Until 2013, there was hardly any other spec development in any other asset type besides multifamily. The development companies who had held onto their teams were continuing to do that work with the people they had, then we began to see a real change in the development side of the business in the third quarter of 2013. That’s when I saw a noticeable change that development companies across the board—all asset types—were hiring again. That’s a real indicator for the real estate business.”
Since real estate is a leading indicator, this expansion bodes well for employment in other industries, Dudley points out. “The fact that these developers are building large distribution warehouses for major large corporate clients—that’s an indication that those corporations are growing and adding professional teams. There’s no doubt about it. When you see the beginnings again of certain spec office buildings being built, which they are now, they wouldn’t be building them unless there’s a demand for space. The only reason for that is if companies are growing.”