Insights in Seniors Housing & Care
The Labor Department reported that there were 213,000 jobs created in the U.S. economy in June, above the consensus expectation of 195,000. This followed an upwardly revised gain of 244,000 jobs in May (originally reported as 233,000) and an upwardly revised gain of 175,000 in April (originally reported as 159,000). The two-month revision was a positive 37,000 new jobs. After revisions, payroll gains have averaged 211,000 per month over the past three months and 215,000 per month since the beginning of the year. In 2017, they averaged 182,000 per month.
The unemployment rate rose to 4.0% in June from 3.8% in May. The increase was largely due to 601,000 workers entering the labor force. Despite the increase, the jobless rate is still well below the rate of what is generally believed to be the “natural rate of unemployment” of 4.5% and continues to suggest that there will be growing upward pressure on wage rates. The jobless rate is calculated from a different survey than the survey used to calculate the number of new jobs (the household versus the establishment survey, respectively).
A broader measure of unemployment, which includes those who are working part time but would prefer full-time jobs and those that they have given up searching—the U-6 unemployment rate—rose to 7.8% in June from 7.6% in May but was down from 9.2% as recently as December 2016. May’s rate was the lowest level in 17 years. The number of long-term unemployed (those jobless for 27 weeks or more) increased by 289,000 to 1.5 million and accounted for 23% of the unemployed.
Average hourly earnings for all employees on private nonfarm payrolls rose in June by five cents to $26.98. Over the past 12 months, average hourly earnings have increased by 72 cents, or 2.7%. This is the same as in May and up from 2.5% on average in 2017.
The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work increased by 0.2 percentage point to 62.9%. Nevertheless, this remains quite low by historic standards, although up from a cyclical low of 62.5% in October 2015. The low rate at least partially reflecting the effects of an aging population.
Health care added 25,000 jobs in June and has increased by 309,000 over the year.
Separately and earlier this week, the Labor Department reported that 3.4 million workers quit their jobs in April, near a 2001 peak and twice the 1.7 million who were laid off from jobs in April. Workers are more confident and willing to quit because the economy and the labor markets are strong. Workers who quit experienced a nearly 30% larger pay increase in May than those who remained in the same job over the past 12 months according to research by the Federal Reserve Bank of Atlanta.
The June jobs report as well as indications that GDP growth was strong in the second quarter will provide further support for increases in interest rates through 2018 by the Federal Reserve. As widely expected, the Fed increased the fed funds rate by 25 basis points at its June FOMC meeting, the second increase in 2018. The Fed has raised rates by a quarter percentage point seven times since late 2015, and most recently to a range between 1.75% and 2.00%, after keeping them near zero for seven years. The June projections by the Fed now show a total of four increases in the fed fund rate anticipated in 2018 (two of which have already occurred), up from an earlier expectation of three. Further increases are anticipated in 2019. Their projection for the fed funds rate in 2020 is 3.4%. Hence, it is likely that there will be another 25-basis point increase announced by the Fed at its September and December FOMC meetings.
Beth Burnham Mace is a special advisor to the National Investment Center for Seniors Housing & Care (NIC) focused exclusively on monitoring and reporting changes in capital markets impacting senior housing and care investments and operations. Mace served as Chief Economist and Director of Research and Analytics during her nine-year tenure on NIC’s leadership team. Before joining the NIC staff in 2014, Mace served on the NIC Board of Directors and chaired its Research Committee. She was also a director at AEW Capital Management and worked in the AEW Research Group for 17 years. Prior to joining AEW, Mace spent 10 years at Standard & Poor’s DRI/McGraw-Hill as director of its Regional Information Service. She also worked as a regional economist at Crocker Bank, and for the National Commission on Air Quality, the Brookings Institution, and Boston Edison. Mace is currently a member of the Institutional Real Estate Americas Editorial Advisory Board. In 2020, Mace was inducted into the McKnight’s Women of Distinction Hall of Honor. In 2014, she was appointed a fellow at the Homer Hoyt Institute and was awarded the title of a “Woman of Influence” in commercial real estate by Real Estate Forum Magazine and Globe Street. Mace earned an undergraduate degree from Mount Holyoke College and a master’s degree from the University of California. She also earned a Certified Business Economist™ designation from the National Association of Business Economists.
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