Did We Really Create Almost a Million Jobs in January?
Happy Friday! Brian Manning here with the weekly update. Let’s get right to it on this wonderful… We’ll call it a semi-warm winter day in Boulder. Let’s see. So, Monday this week was a quiet new day. Not much to report on there. But it definitely heated up as the week went on.
Tuesday this week, we had Case Shiller. This gives us feedback on home appreciation. This was for the month of November. On a year-over-year basis, home appreciation was up 7.7%. On a month-over-month basis, home appreciation was down 6/10th a percent. If you look at what’s called seasonally adjusted, so they take into account the seasons. Home appreciation was down 3/10th of a percent.
One thing to keep in mind though, is that this was for November closings. November was the apex of interest rates and this was really people shopping for a home probably in September, definitely in October. So, if you look at fatigue in the marketplace, rates going up, rates hitting the apex in November, really not a horrible number. I’m not surprised to see it down a little bit like it is, but definitely not a horrible number. FHFA reports at the same time. FHFA looks at homes across the country with conventional mortgages. They said prices were relatively unchanged from their peak. They were down 1.2%. Again, this only takes into account conventional mortgages. It doesn’t look at jumbo mortgages, it doesn’t take into account cash buyers. So, still actually a pretty stead of report and good to see there.
We also got apartment list. This gives us feedback on rents across the country. On a month-over-month basis, this was down 3/10th of a percent. On a year-over-year basis, the rents were up 3.3%. You know, there was a time when rents were going up at 18%. So, we’re seeing a lot of calming in rents there, which is probably really good. We also got the employment cost index. So, this was Alan Greenspan’s favorite gauge of inflation. Anyone that’s been out there long enough, in this long enough, definitely remembers who Alan Greenspan was. This is definitely his favorite gauge of inflation. Trying to figure out what’s going on with the economy. And on Q4, this was up 1%. Expectations was that this would be up 1.1%. So, it’s good. This is showing a calming in inflation in the employment markets, which is really good to see.
Wednesday this week, it really got heated. We got the ADP report. So, the first Wednesday of every month, we get employment reports from ADP. They’re the largest provider of private payrolls in the US. They have +25 million samples. And, this is for the month of January. And we had an expectation of 175,000 to 180,000 new jobs that would be created, and we only got 106,000. So… not a really big miss on the report, but definitely not within what the expectations were.
Also, Wednesday was Fed day. So, the Federal Reserve had a two-day meeting. It was… Tuesday, concluding on Wednesday. At the end of the two-day meeting, you always have Fed President and this now is Jerome Powell speaking. We had a quarter percent rate hike, which everyone anticipated. No one was really looking for anything different there. What’s always most impactful in these Fed meetings is the comments after the prescribed speech that he reads. So… What we really paid attention to after was his comments on saying that he thinks the Federal Reserve not done hiking rates yet. They think that they need a couple more hikes.
So… If you look at what happened Wednesday, Thursday, it doesn’t seem like the markets are believing this. It looks like the Feds probably bluffing, you know, because they’re just looking at what’s going on in the economy and they’re, you know, nervous and they’re embarrassed because before they said inflation was transitory, and now they’re going to definitely over hike to combat the mistake that they made not long ago on thinking that inflation was transitory. But the markets don’t believe that they have a couple more hikes.
The markets look like they believe maybe there’s one more hike in front of them. The other important thing was that Jerome Powell finally acknowledged that there was deflationary pressure. And the markets really like that because… everyone wants to see a calming and inflation. The purpose of the rate hikes is to calm the employment markets and inflation. So, when you finally get the Federal Reserve to start acknowledging that inflation is calming, that’s a good thing. That’s going to be very helpful for… mortgage rates going forward.
Today, first Friday of every month, we get the BLS report. That’s the Bureau of Labor Statistics. I just want to show you… just some feedback on this report because… there’s something crazy and weird about this report. I’m not going to totally believe it. We’ll see why. So… This is for the month of January, and we always get two types of the report. So, you get a business establishment survey and a household survey. So… Business establishment survey for the month of January said that there were 517,000 jobs created versus 185,000 jobs estimated in expectations. of new job hires in the month of January, and… the two prior months were revised 71,000 hires. So, these are crazy. These are blockbuster numbers.
Then if you look at the household survey, so this is when they call households across the United States. Household survey said that 894,000 jobs were created in the month of January. You know, of that, they say 606,000 were part-time jobs. And this is really what moved the unemployment rate. We were at 3.5%, and this moved us down to 3.4%. What’s insane about this is ADP samples 25 million direct samples, paychecks going out every week, biweekly, monthly, whatever it is, across the United States.
And ADP was the best data points ever says we only had 106,000 jobs created in the US in the month of January, but the BLS says 894,000. No. Something’s wrong here. This is a big mess. There’s no way. I cannot believe this. So, digging deeper into this… If you look at this, the BLS changed their methodology and the way that they calculate jobs. And if you look at their report, They say… 894,000 jobs were created, but they have this thing called the 2023 Population Control Effect that they don’t really explain what it is. It’s just an entry on a spreadsheet. When you take that into account and you extrapolate that out, it really says that 84,000 jobs were created in the month of January. So, how they go from 84,000 jobs to 894,000 with some magic on a spreadsheet does not make sense.
You know, the crazy thing is this, if we had 894,000 jobs created in the month of January, this would be the greatest economic expansion ever. I don’t know about you all, but when I look at the news right now, I’m reading about layoffs, Microsoft, Google. The list goes on and on and on. So, how do we see layoffs taking place everywhere but the BLS report says we created almost a million jobs in the month of January. It makes no sense to me. So, I think what you’re going to see is markets digest this information, really jump into it, figure out what’s going on, and probably start to react accordingly. So, it’s kind of crazy to see what’s happening there.
First, I do want to actually say thank you so much to Barry Habib and MBS Highway. That’s really where I get all this information every week. MBS Highway is incredible. They report information to us. Always accurate, up to date, best commentary ever. So, I just have to really give credit to them. Also, I’m around all weekend. If you have any questions, let me know. If you want to go through our strategic buyer consultation, call me on my cell phone, text me. I’d love to help you.
Happy Friday. Have a great day!
-Brian
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