The Bureau of Labor Statistics just released November’s jobs report, and the numbers are much better than what economists projected. With the debate over the timing of interest rate hikes growing more intense with each new bit of information, the positive jobs report is likely to increase calls for the Federal Reserve to raise interest rates sooner rather than later. Right now, the general consensus is that the Fed will raise its benchmark federal funds rate during the middle of next year. However, if future economic data continues to exceed expectations, the doves at the Fed might give into their more hawkish counterparts, and the central bank could raise interest rates during the first-quarter of 2015 instead of later in the year.
Because higher interest rates will affect valuations, borrowing costs, and merger and acquisition activity in the senior housing space, senior housing providers and investors should continue to monitor economic data to see if they can gauge when the Fed might raise interest rates, and plan accordingly. Industry participants who want to take advantage of today’s low rates for acquisitions or other purposes should also contact Cambridge Realty Capital to learn more about the many different financing options that it offers for a wide variety of senior housing transactions.
Details from the Jobs Report
According to the Department of Labor’s Bureau of Labor Statistics, the U.S. economy added 321,000 jobs in November, easily beating economists’ expectations, while also posting more than 200,000 in net job gains for the tenth straight month. Perhaps even more important than the number of jobs that were created is the 0.4 percent increase in wages that occurred during the month. While this figure is not as high as a lot of workers would like, it is still twice as much as the 0.2 percent figure that economists projected, and is particularly important to the Federal Reserve because persistent low wages helped keep inflation low and reduced the pressure on the Fed to raise rates.
Consequently, if wages continue to rise at a faster rate than projected, this could increase the pressure on the Federal Reserve to raise rates during the early part of 2015 instead of later in the year. Furthermore, in addition to positive job growth and wage figures, oil and gas prices also fell in November, leaving consumers with more money to spend in time for the holiday shopping season. Because consumer spending accounts for roughly two-thirds of the economy, a significant increase in spending could boost economic growth significantly and also increase pressure on the Fed to raise interest rates soon.
Unfortunately, the jobs report was not all good news, as the unemployment rate remained unchanged at 5.8 percent, even with the all of the jobs that were added to the economy. And at 62.8 percent, the labor participation rate remained at historic lows. However, November’s jobs reports was still very positive, and economists are hoping that the impressive gains that were made during the month are the start of a trend, and not a one-time event.