According to the jobs report that was just published by the Commerce Department, the economy created 209,000 jobs in July. Federal Reserve officials are undoubtedly pouring over specific information in the report and will take it into account during their deliberations on monetary policy. Before the Fed raises interest rates as it is expected to do sometime next year, senior housing providers should contact Cambridge Realty Capital to learn more about the different financing options that it offers for acquisitions, sale/leasebacks, joint ventures, and other purposes as well.
Details from the Jobs Report
July’s jobs report was somewhat mixed as the 209,000 jobs that were created was a good number, but was also less than the 230,000 that economists were expecting. However, July still represents the sixth straight month that the economy created more than 200,000 jobs which is significant because this level of sustained growth hasn’t happened since 1987. Furthermore, May’s job figures were revised upwards from 224,000 to 229,000 and June’s were revised upwards from 288,000 to 298,000. Also, while the unemployment rate increased from 6.1% to 6.2%, this is partially due to an increase in the labor participation rate from 62.8% to 62.9%. The uptick in this rate is a positive sign because it means that people who had previously given up on looking for work switched gears and began looking for employment again due to optimism about the economy and the job market. However, countering this piece of good news was information on wage gains which were again muted as average hourly earnings increased by just one cent during the month. With respect to job growth in specific industries, the business service industry had the most gains with 47,000 new jobs, the manufacturing industry added 28,000 jobs, the retail trade industry added 27,000 jobs, and the construction industry added 22,000 jobs.
The Jobs Report’s Impact on Monetary Policy
Some economists believe that because fewer jobs were created than expected, the Federal Reserve could decide to keep interest rates low for a while longer. Furthermore, according to a separate report that was published by the Commerce Department, from July 2013 to June 2014, a price gauge for consumer spending increased by just 1.5%. And although this gauge excludes food and energy costs, the 1.5% increase was still 25% below the Fed’s 2% inflation target. This is important because one of the main reasons the Fed raises interest rates is to combat the threat of inflation, but with inflation already running so low, there’s no apparent threat to combat and this gives the Fed some leverage if it wants to keep rates low for a longer period of time. Indeed, this was reflected in trading activity last week as trades in futures contracts denoted a shift from an earlier projection of an increase happening in June 2015, to a new projection of an increase taking place a month later in July of next year.
Although the jobs report was mixed, it didn’t seem to affect economists’ predictions of continued economic growth during the second half of the year. Even if inflation continues to remain low, as the economy continues to grow the Fed will find it harder to justify keeping rates at their near zero level for a prolonged amount of time. Accordingly, before the Fed reacts to the growing economy by boosting rates, senior housing participants should continue to look to Cambridge Realty Capital for assistance in financing acquisitions, joint ventures, and a number of other transactions as well.
