The monthly jobs report is the single most important economic release every month. Why? It is all about jobs–the economy, interest rates, real estate and more. To put it simply, consumer spending drives the economy and without enough jobs being created, consumer consumption will not grow. The relationship between job creation and real estate is a perfect example. When more jobs are created, increased demand is created within the real estate sector. When there is more real estate demand, more jobs are created.
The next question is — what are we looking for within the report? Traditionally, the unemployment rate is the headline number each month. Yet, as the unemployment rate has dropped more than 3.0% from its recessionary high, we see that the rate tells only part of the story. The labor “participation” rate can cause variations in the unemployment rate. Many who have removed themselves from the labor force through retirement and other factors can be enticed back if there is a demand for workers. Thus, the unemployment rate can go up with the creation of more jobs or the rate can go down with the creation of fewer jobs even though these results seem to be counter intuitive.
More recently, the number of jobs created appears to have become just as important as the unemployment rate. Even the Federal Reserve Board which had set a goal of a 6.5% unemployment rate before considering altering their fiscal policies admitted at their last meeting that other factors will be taken into consideration within the decision-making process. Plus, because the last two reports have been disappointing with regard to jobs creation, we will also keep a close eye on revisions of the previous two months’ of data. Complicating matters even further is the fact that winter storms continued through a good portion of February. As muddled as the picture is — a surprising report in either direction can affect the markets and the economy significantly.