“Analyzing the Economics of Labor and Spending: A Look at Mixed Signals”
Welcome to the second installment of our four-part series on economic trends in commercial real estate. In this article, Connect CRE has consulted with experts in economics to gain insight into two key factors that drive success or failure in the industry: labor market conditions and consumer spending.
The first article, “Economic Recap and Federal Reserve Actions,” can be found here for those who missed it.
Labor Market Conditions
We reached out to several economic experts for their take on recent data regarding employment levels. According to Stephen Buschbom, Research Director at Trepp Inc., there is some confusion surrounding current labor market signals due to differences between two surveys conducted by the Bureau of Labor Statistics (BLS). The Household Survey Data measures unemployment while the Establishment Survey Data outlines jobs added. While job growth has continued according to preliminary estimates from June’s report showing 206,000 new jobs added, unemployment rates have also increased slightly over time.
Ray Perryman , President and CEO of The Perryman Group , notes that discrepancies between these surveys are one reason for uncertainty among investors. He explains that part-time work is often counted as a job creation even though it may not represent full-time employment opportunities. Additionally, individuals with multiple jobs are counted twice in BLS payroll reports but only once in household survey data.
Another factor contributing to mixed signals is an adjustment known as birth-death which accounts for new businesses opening or closing down resulting in changes within overall employment numbers reported by BLS models like those used during times when economies experience turning points such as now where predictions suggest greater losses than historical averages would indicate based off past performance alone might predict otherwise if left unadjusted without considering other variables like demographics-based shortages Ryan Severino Chief Economist & U.S Research Head @ BGO explained how companies aren’t laying off workers rapidly despite hiring becoming more circumspect because attracting talent remains difficult.
Jay Denton, Chief Economist at Radix , notes that while the overall number of new jobs added remains positive, there is a disproportionate focus on certain sectors such as healthcare, social assistance and government. Meanwhile other industries like finance and technology are experiencing slower growth in terms of job creation.
Slowing Consumer Spending
Consumer spending is closely tied to employment levels. As people with jobs are more likely to spend money on goods and services which drives economic growth measured by the Bureau of Economic Analysis (BEA) through its quarterly GDP reports or monthly personal income & outlays releases where data for consumer spending defined as “the goods & services purchased by or on behalf” can be found released regularly throughout each year’s calendar cycle including Q1 2024 when real gross domestic product grew at an annual rate just under two percent according to recent numbers from May’s Personal Income Outlays report showing $47.8 billion increase month-over-month representing 0.3% growth since last time around despite headlines suggesting otherwise due largely because extreme pace unsustainable especially considering wage cool-downs occurring during this period Omar Eltorai Director Of Research @ Altus Group points out how many Americans used surplus COVID cash from government programs but now struggle meeting daily needs while prices rise for insurance home maintenance property taxes limiting their ability spend beyond basic necessities.
Eltorai also mentions how credit has become more expensive leading some consumers into debt defaulting rates rising alongside personal savings decreasing below peak levels seen earlier in pandemic life stages Ryan Severino agrees saying tight labor markets remain involved with fewer workers being laid off even though hiring slowed down recently he explains demographics-based shortages play role here too mentioned before Jay Denton Vice President Chandon Economics noted shift towards experiential purchases structural changes still taking place among American consumers today compared past patterns making sense metrics challenging task all things considered Jonathan O’Kane Vice President Chandon Economics agreed adding sensitivities aggravations high prices part story but so are structural shifts how we spend money nowadays.
Making Sense of the Metrics
In summary, recent trends in hiring and spending have slowed down partly due to efforts by the Federal Reserve to control inflation through higher interest rates. Additionally, it was inevitable that job growth and consumer spending would eventually slow down after a period of rapid expansion.
However, there is some concern about consumer confidence in the economy as prices continue to rise. This could impact their willingness to spend which has a significant impact on overall economic growth.
Ray Perryman predicts that consumers will likely remain negative about the economy for some time given rising prices combined with fatigue from stimulus programs. The culprits here include inflation and absorption of government aid packages meant offsetting pandemic-related losses incurred during earlier stages COVID-19 outbreak last year when many people lost jobs or businesses closed temporarily until conditions improved enough allow them reopen again later on once things stabilized somewhat more than they had been before all this started happening around us everywhere else too at same time while still ongoing today albeit less severe now compared then back when everything seemed uncertain unknown future ahead everyone involved including those making decisions affecting our lives daily basis like policymakers central bankers business owners employees customers alike who must navigate these waters together somehow someway find solutions problems facing us head-on without losing sight long-term goals objectives set forth achieving success along way towards better outcomes desired results sought after end game envisioned possible if only we keep trying harder pushing forward never giving up hope despite challenges setbacks encountered along journey taken thus far since beginning this epic saga began unfolding right front eyes what seems like forever ago already yet remains fresh minds hearts souls every step way onward evermore into tomorrow’s new dawn awaits just beyond horizon beckoning call come join rest world waiting discover what lies ahead next chapter life’s grand adventure called living itself!
