The unemployment rate in September fell to its lowest since 1969 to 3.7 percent, according to the latest jobs and wages data released by the Bureau of Labor Statistics [1] on Friday. However, the growth of jobs softened to 134,000 in September compared with an average monthly gain of 201,000 over the last one year, the report [2] revealed.
Wage growth, though slow, continued its upward trend during the month rising 2.8 percent year-over-year.
Despite this slow growth in wages and weak hiring, the report shouldn't spark any concerns regarding the strength of the labor market and the broader economy, according to Doug Duncan, Chief Economist at Fannie Mae [3], who put the three-month average increase in jobs at a "healthy 190,000."
"In addition, Hurricane Florence may have temporarily suppressed hiring, as suggested by the first drop in leisure and hospitality payrolls since last September, shortly after Harvey’s landfall," Duncan said.
According to Tendayi Kapfidze, Chief Economist, LendingTree [4], despite the disappointing jobs report, the "job market remains robust, emphasized by upward revisions to job numbers for both July and August totaling 87,000."
"Although September’s wage increase pales in comparison to growing home prices—which rose another 7 percent last month—any increase is helpful for buyers trying to get in the market," said Danielle Hale, Chief Economist at Realtor.com [5]. "However, if this growth is seen as a sign of higher inflation, it could prompt mortgage rate increases, which would eat into home buying power."
However, though home buying power has seen a decline, it hasn't been as much thanks to rising household incomes, according to Mark Fleming, Chief Economist, First American [6]. "In September, consumer house-buying power declined by $28,000, compared to a year ago. If household income had not increased compared to a year ago, the increase in mortgage rates would have reduced consumer house-buying power by $38,000," he said.
However, despite rising incomes, wages have continued to disappoint throughout this year. "The low labor force participation rate may offer a clue as to why. The large pool of available people to enter the labor force is a drag on wages as it reduces the bargaining power of workers who are already employed," Kapfidze explained.
However, according to Duncan, the "Annual growth in average hourly earnings, which slowed one-tenth from the expansion high in the prior month, shouldn’t stoke inflationary concerns."
Wage growth, in fact, is a wild card, said Hale, that could have a significant implication on the housing market. "If we see significant wage increases, we could start to make up ground in home sales, which have been woefully behind last year’s gains. If wages remain stagnant, home sales will likely continue to taper," she said.
The recently rising mortgage rates are also likely to have an impact according to Fleming. "While recently rising mortgage rates have reduced consumer house-buying power, rising household income increases house-buying power," he said.
Looking at construction jobs which increased at a slower pace by 23,000 in November, Duncan said that the impact of Hurricane Florence was felt on the construction jobs market too. However, he said that any lost construction jobs associated with the hurricane should be recouped as the affected areas recover.