Home Price Forecast Sees Upward Revision.

Home Price Forecast Sees Upward Revision.

The labor sector delivered plenty of news for the markets to digest, including some important signals about what may be ahead. Plus, the latest on home prices, manufacturing and more in these stories:

Mixed Jobs Report for March

Disappointing Private Sector Job Growth Signals “Slowing” Economy

Reporting Adjustment Sheds Light on Unemployment Claims

Home Price Forecast Sees Upward Revision

Recession-like Conditions Continue in Manufacturing

Mixed Jobs Report for March

According to the Bureau of Labor Statistics (BLS), 236,000 new jobs were generated in March, which was in line with expectations. The revisions to the statistics from January and February resulted in a combined loss of 17,000 jobs for those two months, which somewhat tempers March’s increases. Despite a growth in the labor force, the unemployment rate decreased from 3.6% to 3.5%.

What’s the bottom line? Despite the strength in these headline points, a deeper look at the data shows some signs of weakness in the labor market.

Leisure and hospitality accounted for 72,000 new jobs in March. This sector has been a huge driver of job gains after the massive losses seen during the height of the pandemic. However, 98% of these jobs have now been regained so they may not contribute to the overall total for much longer. In fact, the latest Job Openings and Labor Turnover (JOLTS) report showed a sizable drop in leisure and hospitality job openings over the last two months.

In addition, while average hourly earnings were up 4.2% year over year in March, this is a decline from 4.6% and the lowest post-COVID yearly increase we have seen. Average weekly earnings were only up 3.3% year over year, which is also a big drop from the previous two reports.

It also appears that some companies are cutting hours to save costs, which is another sign of a slowing labor market. The average workweek fell from 34.5 hours to 34.4 hours, the lowest number of hours worked since 2019 (excluding COVID). While this doesn’t sound like a large decline, it reflects the entire US workforce of 161 million workers whose hours were cut by a tenth of an hour on average. This reduction in hours equates to 468,000 job losses.

Disappointing Private Sector Job Growth Signals “Slowing” Economy

Given that just 145,000 new positions were generated in March according to the ADP Employment Report, private payrolls fell short of expectations last month. Job changers’ average annual salary climbed by 14.2%, while job keepers’ increased by 6.9%. Despite the fact that these numbers are still high, pay pressure on inflation has decreased.

Although the leisure and hospitality industry once again led the way with 98,000 job increases, as was previously mentioned, these positions may not support the total private payroll for very long.

What’s the bottom line? Nela Richardson, chief economist for ADP, said, “Our March payroll data is one of several signals that the economy is slowing. Employers are pulling back from a year of strong hiring and pay growth, after a three-month plateau, is inching down.”

Reporting Adjustment Sheds Light on Unemployment Claims

Initial Jobless Claims decreased by 18,000 in the most recent week as 228,000 persons made their initial application for unemployment benefits. This, however, does not cover all. Due to technique changes, which are described below, the statistics from the prior week were increased from 198,000 to 246,000.

Moreover, 6,000 more people—1.823 million—were receiving unemployment benefits after filing their original claim. Moreover, the previous week’s total was increased from 1.689 million to 1.817 million, adding to this amount.

What’s the bottom line? The Bureau of Labor Statistics has revised the seasonal adjustment factors they were using to compile the Jobless Claims report now that they have a better understanding of how COVID impacted the numbers in recent years. This has caused a material change in many of the previous reports over the past five years, making the number of Initial and Continuing Claims MUCH higher. These revisions paint a very different labor market picture than previously reported.

In addition, the Job Cuts Report from Challenger, Gray & Christmas showed that there were 90,000 job cuts in March, which is 15% higher than February. The technology sector led the way, accounting for 38% of the total. The report also noted that market and economic conditions, cost-cutting, and unit or department closings are the biggest reasons for job cuts made this year.

Home Price Forecast Sees Upward Revision

According to CoreLogic’s House Price Index, national home prices increased 0.8% from January to February and were 4.4% higher than in the same month last year. This annual appreciation reading is no longer as strong as it was in January, when it was 5.5%. According to CoreLogic, home prices will grow 0.2% in March and 3.7% overall in the coming year, which is an increase from the 3.1% predicted in the January survey.

What’s the bottom line? CoreLogic’s Chief Economist Selma Hepp said that “U.S. home prices rose by 0.8% in February, double the month-over-month increase historically seen and indicating that prices in most markets have already bottomed out.” She also noted that “pent-up homebuyer demand is responding favorably to lower rates in many markets.”

On a related note, Black Knight’s latest Mortgage Monitor Report showed that home prices rose 0.2% in February, which is the first monthly gain since they peaked last June. Prices are now down just 2.6% from their peak, a far cry from a housing crash of 20% that some in the media have been predicting.

Recession-like Conditions Continue in Manufacturing

As the ISM Index was announced at 46.3% for March, economic activity in the manufacturing sector continued to be in contraction zone for the fifth consecutive month. This information, which assesses the state of the American manufacturing industry, was gathered through a poll of purchasing and supply executives conducted across the country. The reading for March was below estimates, and both new orders and production fell. In general, scores above 50% signify a rising industrial economy, while readings below 50% signify a declining one.