The Department of Labor released its August jobs report, and the numbers are substantially lower than economists projected. Since the Federal Reserve considers labor market growth a primary factor when deciding monetary policy, job figures are especially important. Fed Chairwoman Janet Yellen often voices her concern on job growth, and cites high unemployment figures and low wage growth to explain her support for low interest rates. If jobs and wages grow at a higher rate than projected, it is difficult for the Federal Reserve to support its low interest rate policies. When job and wage growth is lower than projected, Federal Reserve officials can more easily justify their low interest rate policies. This is due to a belief that low interest rates will stimulate the economy and spur job creation.
The weak job gains for August increase the probability that the Federal Reserve will continue to keep rates low. Because low interest rates are helping to fuel mergers and acquisitions in seniors housing, such activity will likely continue at a rapid pace.
Details from the Jobs Report
According to the Department of Labor, the economy created 142,000 jobs in August, fewer than the 225,000 economists projected. This represents the fewest number of monthly jobs created this year. The decrease in the unemployment rate, from 6.2 percent to 6.1 percent, might be due more to people dropping out of the labor market than to those in the labor market who found jobs–the labor participation rate fell from 62.9 percent to 62.8 percent.
The jobs report also indicates wages increased in August by just six cents, or 0.2 percent. Low wage growth means price increases are less likely; this pushes back on the argument put forth by some monetary hawks that the Fed should raise interest rates to combat inflation. The greatest gains in August came in the professional and business services sector (47,000 new jobs), the healthcare sector (34,000 new jobs), and the construction sector (20,000 new jobs).
Despite the disappointing numbers, the August jobs report did contain a bit of good news. The number of long-term unemployed fell by approximately 200,000, a figure which now stands at slightly less than 3,000,000. The number of part-time workers looking for full-time work fell from 12.2 percent to 12 percent.
With August job figures coming in lower than projected, there is less pressure on the Federal Reserve to raise interest rates. While those rates remain low, senior housing participants seeking capital to refinance debt, acquire properties, or engage in other wealth generating transactions, should contact the Chicago-based financing firm Cambridge Realty Capital to learn more about different financing options for a wide range of senior housing transactions.