Off by Practically 1 MILLION Jobs? Why New Jobs Report Will Influence Leases

Dave:
Large financial information dropped during the last week from sturdy labor knowledge to large revisions in regards to the knowledge we acquired final yr, a brand new inflation print. All this collectively introduced us new insights that may assist us see the place the economic system and the housing market is heading. So in as we speak’s episode of On the Market, we’re diving into the most recent financial information that will help you make sense of the markets and assist drive determination making. We’re speaking about new jobs, reviews, inflation knowledge, shopper sentiment, and the way all of that comes collectively to influence our mortgage fee outlook. We’re additionally going to debate some explicit sectors, the housing market which are poised to shine and which areas is perhaps at best threat. That is available on the market. Let’s get into it.
Hey everybody, it’s Dave. Welcome to On the Market. Final week was a giant one for financial information and all of the issues we discovered are going to straight influence mortgage charges. They’re going to influence purchaser demand and the course of the housing market. So we’re going to dive into the most recent knowledge as we speak and discuss what it means as we head into the hopefully busy spring shopping for season. First up we’re going to speak about labor knowledge. What’s happening within the job market? It is a huge query on the market as a result of during the last couple of months we’ve had quite a lot of conflicting alerts. However earlier than I dive into what we discovered, I simply needed to clarify why this even issues for actual property traders as a result of labor market won’t appear apparent what this implies for the housing market. However first, it helps us perceive purchaser exercise.
People who find themselves dropping their jobs or are scared of their jobs, most likely not going to purchase a home. Second, it helps us to know rental demand and lease progress as a result of identical form of factor about demand applies for renters. If they’re fearful about their job, wages aren’t rising, that form of factor, it’s most likely going to stagnate lease demand. Third, it helps us predict what occurs with rates of interest as a result of the Federal Reserve, they’re watching carefully bond traders who dictate the place mortgage charges go. They watch these items carefully. So we have to keep watch over what’s happening within the labor market. It actually does influence the housing market. So let’s discuss what we discovered. General, it was excellent news. We noticed sturdy general job progress with non-farm payrolls, which is mainly how the BLS tracks labor knowledge. We noticed an addition of 130,000 jobs in January, which is nice.
That truly beat expectations of simply 75,000, in order that’s a major beat. We additionally noticed the unemployment fee, which has its flaws, however continues to be a very good metric to trace alongside the whole lot else we’re taking a look at. Unemployment fee really ticked down from 4.4% in December to 4.3%. Now, I’ll simply spill the beans right here. That’s not essentially from a rise in hiring, though we did see jobs added. The unemployment fee most certainly is ticking down as a result of we a smaller labor drive resulting from much less immigration. Whenever you dig into the labor knowledge, you see that the economic system is form of splitting. A lot of the jobs that had been added in January, had been extremely, extremely concentrated in healthcare. That space of our economic system continues to be rising. They’re hiring, however in case you take a look at different sectors within the economic system, it’s not doing that nice. We see that manufacturing is down 100 thousand jobs within the final yr.
Similar with it. Mainly tech. We additionally see skilled and enterprise companies down huge. These are white collar jobs down 200,000 during the last yr. So the massive headline is nice. It’s good that unemployment is shrinking. It’s good that we added over 100 thousand jobs in January, nevertheless it actually relies upon available on the market. In the event you work in tech or or manufacturing, you’re most likely not feeling nice in regards to the labor market as a result of these sectors are literally dropping. Whereas in case you work in healthcare, you most likely really feel nice about your job prospects. In order that was the massive headline information, however there was really another information that got here out with this BLS report that I believe possibly is even larger information in January. The BLS at all times releases their annual revisions. Mainly the way in which that the BLS tracks employment knowledge isn’t superb. I don’t know the way else to say it.
Individuals have been vital of it for a very long time. What I at all times say on the present after we discuss labor knowledge is that there isn’t any one good labor metric. You form of have to take a look at the massive image. There’s 5, 6, 8 various things that you have to be taking a look at and you may, in case you take a look at them, all get a holistic sense of the place issues are going. That mentioned, the BLS, that is the massive factor that traders take a look at. It’s on the entrance web page of the Wall Avenue Journal. That is the massive quantity, nevertheless it’s additionally not superb, and also you see large revisions occasionally the place the BLS really says what we launched. That preliminary estimate wasn’t superb and truly the information is altering they usually launched their huge annual revision for the yr in January. So what it really reveals that between 2024 and 2025, the full variety of jobs that that they had beforehand introduced was revised down by almost 1 million jobs.
That’s loopy. So mainly they had been releasing knowledge, thought that we had these million jobs added. They mentioned greater than that, however they’ve come out and mentioned, really, we overstated what number of jobs had been added by one million jobs. And I do know that’s quite a bit. It’s loopy. It’s really the second largest unfavourable revision on file. So yeah, that’s a very huge revision, however in case you take note of these things, you most likely already know that the BLS, the Bureau of Labor Statistics, their knowledge isn’t good. And I’ll simply say I don’t suppose that these revisions are a rip-off. I don’t suppose they’re essentially taking part in video games. I simply suppose they’ve a really dangerous imperfect method of gathering knowledge. They extrapolate quite a bit and this has been happening for a very long time. This has been happening for 20 years. So it’s not like one thing has actually modified.
And I believe it’s pure that in instances the place the economic system is shifting quite a bit like proper now or like 2009 once they launched the opposite largest revision ever, that it’s not as correct as a result of they’re extrapolating quite a bit and when patterns shift, it’s more durable to extrapolate. However I may also say I believe these revisions are wanted. I might somewhat them admit that they had been incorrect after which to launch new numbers despite the fact that it’s irritating and it makes it quite a bit more durable to belief the brand new numbers as a result of they’re most likely going to alter it. And this is without doubt one of the a number of causes that we have to take a look at the massive image. Once more, many various knowledge units, none of them. Excellent. We acquired to absorb the entire thing. So past simply this BLS knowledge, what else are we seeing? We’re seeing that A DP, which is a personal firm, they observe jobs numbers each single month, however they’re a personal firm, not the federal government.
They confirmed solely 22,000 jobs added, which is a serious divergence. It’s nonetheless up, that’s good. Nonetheless jobs being added however off by over 100 thousand. So it form of is a head scratch or it makes you marvel which one is correct. To me, I believe an important indicator that I’m taking a look at proper now in February of 2026 is job openings. It is a actually essential indicator of simply what number of corporations are feeling bullish and need to put money into labor and are on the market hiring. It’s down to six.54, which in a historic context, it’s a fairly regular quantity, however it’s falling shortly. It’s happening quite a bit within the final two months down virtually a full million in two months. That’s like 15% in two months. That’s a giant deal and it’s one thing that I believe signifies that corporations are going to drag again extra on hiring and hiring.
In order that’s regarding. And one thing I personally suppose goes to proceed. In the event you simply take a look at traits in AI and funding instances, individuals aren’t hiring that a lot. However on the opposite aspect of issues, layoffs are actually not as dangerous because the media makes it out to be. In the event you take a look at preliminary unemployment claims, it is a weekly set of information that comes out that simply seems to be at how many individuals are submitting for unemployment insurance coverage for the primary time. In order that’s a very good indicator of who acquired laid off. Individuals who get laid off, they file for unemployment insurance coverage. And so that you take a look at these claims they usually’re really been actually flat. They fluctuate week to week, however in case you simply look again over 2025 and into early 2026, it actually hasn’t modified that a lot. Jerome Powell, the chairman of the Fed really mentioned, we’re within the no hearth, no rent economic system.
I believe that was like two press conferences in the past. In the event you care about these items, and I believe that’s a fairly correct evaluation of what we’re seeing. We’re not seeing large layoffs, however we aren’t seeing individuals hiring both the course of the labor market, not tremendous sturdy, however undoubtedly not that weak both. I believe we’re nonetheless form of in limbo attempting to know what course that is going forward. Alright, in order that’s what we’ve discovered in regards to the labor market up to now. Extra conflicting alerts. Personally, I’m not feeling like we’re in a really sturdy labor market, however I’m inspired to see that we’re not in an emergency standing both. An unemployment fee of 4.3 is actually low, however there are indicators that issues are beginning to weaken and so we have to keep watch over that. The opposite main financial indicator we as actual property traders needs to be listening to is inflation. And we acquired a model new report on inflation final Friday and we’re going to get into that proper after this fast break.
Welcome again to On the Market, I’m Dave Meyer supplying you with an financial replace on all the important thing indicators we as actual property traders needs to be watching. First we speak in regards to the conflicting labor knowledge that now we have acquired during the last week or so, however we additionally acquired an inflation report, which goes to be actually essential for the way forward for mortgage charges. So let’s discuss what was in that. Principally it was excellent news. We acquired a very good inflation print final week, which personally I discover encouraging the CBI rose 2.4% in January yr over yr, which isn’t dangerous. In December it was up 2.7%, so it really got here down a bit and it was beneath the two.5% that economists had been anticipating. Sure, it’s nonetheless above the two% fed goal, however it is usually method down from the place it was a number of years in the past when it briefly topped 9%.
So it’s not the place it must be, however for me, if now we have a 2% fed goal, we’re at 2.4%. We’re getting fairly darn near the place we need to be for inflation. I additionally need to name out that it has been virtually a full yr now because the quote liberation day tariffs had been introduced and though knowledge reveals that US shoppers are footing roughly 90% of the invoice for these tariffs, it’s not companies or different nations paying it, 90% of these prices are going to US shoppers. General. Inflation has not gone up considerably. The merchandise which are topic to tariffs have actually gone up, however that has been offset by falling costs elsewhere. We see will increase in issues like floor beef. That’s the very best one is up 17% yr over yr. Dwelling healthcare hospital care watches, these are all up nicely above the goal, however we’re additionally seeing declines in gasoline costs.
That’s most likely the key factor that’s driving down the general CPI is that gasoline costs are happening. We’ve additionally seen declines in used automobile costs, which everybody is aware of have been loopy during the last couple of years and we noticed a giant drop in eggs. The egg drama continues, it’s down 7% in only one month. Really, who would’ve thought three years in the past that egg costs can be such a topic of curiosity on an financial present? However right here we’re, my pals speaking about eggs they usually’re down 7%, which is nice information. Now after we mix these items collectively, after we take a look at the labor knowledge and the inflation knowledge that we simply acquired final Friday, it begins to tell what we needs to be anticipating for mortgage charges as a result of as we all know, the Federal Reserve, their job is to form of stroll this kind rope, hold the seesaw in steadiness between the labor market and inflation.
They don’t need to minimize charges an excessive amount of as a result of they worry that may trigger inflation, however in case you hold charges too excessive to regulate inflation, that may harm the labor market. So that they’re at all times looking for this impartial fee is that this magical quantity that they’re attempting to attain that will get us the optimum labor market and the optimum inflation fee and the financial reviews, the 2 that I simply shared with you must present you why they’ve a tough job proper now and why I don’t suppose charges are going to come back down that quickly. Have a look at these reviews, hiring was strong, unemployment fee is low. That will counsel holding charges greater, not doing extra cuts as a result of the economic system, it doesn’t want stimulus proper now. Nevertheless, with decrease inflation, many would argue that we now have wiggle room to decrease the federal funds fee, decrease short-term borrowing prices and supply some juice for the economic system.
The actual fact is we simply can’t get a transparent sign. Every little thing is simply too unsure and sometimes it’s contradictory. Mortgage charges did occur to fall this week. I’m recording this a number of days earlier than the discharge, however we might even see charges within the excessive fives this week, which might be thrilling. I believe mentally, psychologically that’s useful. However we’ve seen it earlier than. We all know that this might go proper again up and I simply don’t suppose we’re going to see huge strikes within the mortgage market as a result of now we have continually contradictory knowledge and there’s no clear sign on which method issues are heading. Are we going to see inflation spike? Is it going to proceed happening? Is the labor market going to be decimated by AI or is that each one overblown hype? In order that being mentioned, I’m sticking with my forecast this yr as of now for mortgage charges to stay within the 5 level a half to 6 level a half p.c vary as a result of nothing within the knowledge means that we’re going to see the rest.
And I’ve mentioned it earlier than and I’ll simply say it yet another time that I believe it is a comparatively good factor. Mortgage charges being secure is what we wish as traders, whether or not you’re, even in case you’re an agent or a mortgage officer on the market, extra secure situations create predictable underwriting, it creates dwelling shopping for situations that folks can wrap their head round. They’re not sitting round ready, questioning in the event that they wait a month, is there going to be 1 / 4 level higher charges or a half level higher charges? Individuals will get used to it if now we have these secure charges. And so after we take a look at the labor market and inflation knowledge collectively, I believe stability, it’s nonetheless going to fluctuate 1 / 4 some extent right here and there, however I believe it’s going to remain on this 5 and a half to 6 level a half p.c vary and personally that’s one thing I can take care of. Now in fact, I might like to get to a spot the place we don’t have to speak about mortgage charges on a regular basis, however the reality is it’s going to influence the course of the housing market and there may be one different dataset I need to go over that can also be going to influence the course of the housing market, which is shopper sentiment. How persons are feeling in regards to the economic system goes to influence demand for leases, it’s going to influence demand for properties and we’re going to dive into that knowledge proper after this break.
Welcome again to On the Market, I’m Dave Meyer going over the most recent financial knowledge. Earlier than the break we talked in regards to the complicated alerts from the labor market, the nice inflation print that we acquired, however how these two form of conflicting items of data are most likely going to maintain mortgage charges comparatively secure and that ought to assist the housing market acquire just a little little bit of traction. Stability is nice. Mortgage charges, yeah, they’re not going to maneuver that a lot, however they’re down 100 foundation factors from the place they had been final yr. However there may be one different much less talked about variable within the housing market that we should always discuss, which is shopper sentiment. It as of three months in the past was simply dropping, dropping, dropping was actually at one of many lowest factors we’ve seen in a very long time and the excellent news is that during the last three months it has gone up.
We’ve seen it begin to inch again up, however I need to be sincere that it’s nonetheless not superb. It’s nonetheless 40% roughly beneath the place it was a yr in the past. So persons are not feeling nice in regards to the economic system. Now if you dig into the information, and that is going to essentially inform form of what we needs to be enthusiastic about as traders. Whenever you dig into the information, there’s a huge hole in shopper sentiments. It displays quite a lot of the Ok formed economic system that now we have in america proper now. In the event you take a look at sentiment for shoppers who’ve giant inventory portfolios, they’re really feeling actually good in regards to the housing market. We’ve seen positive inventory market fluctuate during the last couple of months. It’s not simply going up and up and up, which is regular I ought to point out. However these individuals who personal property are feeling fairly good in regards to the economic system.
They’re on the market shopping for, they’re making up an enormous proportion of shopper spending proper now, however for shoppers with out stockholding, so people usually on the decrease finish of the revenue spectrum sentiment, these for these shoppers has not gotten higher. It’s really stagnated at actually, actually low ranges and this Ok formed divide issues for the housing market. It issues for housing demand as a result of wealthier consumers are most likely extra assured. In the meantime, first time entry stage consumers or renters are feeling far much less assured. It is without doubt one of the causes you’ve most likely seen in current months these headlines that present that the posh housing market is on hearth. And that’s true in case you take a look at listings for loopy listings like over one million {dollars}, but additionally listings over $5 million, itemizing over $10 million. That is without doubt one of the strongest areas of the housing market proper now whereas different areas are beginning to stagnate.
So that is one thing I would like everybody listening to this to pay attention to as a result of it actually issues whether or not you’re shopping for an A category, B class, C class, D class neighborhoods, in case you’re shopping for workforce housing, in case you’re shopping for for individuals for renters within the center or decrease finish of the revenue spectrum, demand might be going to be softer. Simply it’s important to anticipate this, proper? Certain, affordability has gotten higher, however when persons are not feeling superb in regards to the economic system, they don’t purchase quite a bit. Economics generally known as the dismal science as a result of truthfully a few of it’s science, sure, however quite a lot of it’s just a few psychology. Lots of what occurs within the economic system and subsequently within the housing market relies on how individuals really feel and in a relative sense, individuals don’t really feel good. Sure, individuals on the excessive finish of the spectrum really feel okay, however the majority of persons are not feeling superb.
We see that mirrored within the shopper sentiment survey that comes out each month. We additionally see that in different surveys in 2025, Gallup really launched some knowledge not too long ago that confirmed that in 2025, solely about 59% of People gave excessive rankings when requested to guage how good their life can be in about 5 years. That’s a fairly essential query. It form of tells you a large number about how persons are feeling and 59% would possibly sound excessive, however it’s really the bottom ranking ever. They’ve solely been asking this query for 20 years, however in 20 years of information, so that features the monetary disaster, extra persons are feeling dangerous about their life prospects in 5 years than at another time this knowledge was collected. Now, is that this the worst economic system it’s been in 20 years? Personally, I don’t suppose so. I believe that prestigious award ought to most likely go to 2008 or 2009, however my sense is that there’s this cumulative impact happening right here.
The economic system, a minimum of for my part, it’s not nice. I additionally don’t suppose it’s horrible. There are some brilliant spots, there are some weak spots. What worries me personally is that the intense spots are actually concentrated in sure sectors. We’re seeing labor progress in healthcare. We’re seeing infrastructure spending in ai. Certain, these are carrying quite a lot of the economic system, however each time quite a lot of progress or quite a lot of power is concentrated in a single space, it feels just a little extra unstable. It feels extra prone to decline sooner or later than in case you had each trade rising, proper? That by no means actually occurs. However in case you had numerous industries that had been rising, to me, that will really feel higher. However the actuality is there are brilliant spots, there are weak spots. It’s neither nice nor horrible, however I don’t suppose the common one that’s responding to those shopper sentiment surveys is actually taking a look at geopolitical unrest and financial coverage and financial coverage.
I believe the truth is that now we have had stagnant wages in america for like 40 years, proper? They’ve gone up about 12% in actual phrases within the final 40 years. That’s actually pronounced in sure industries like manufacturing. After which on prime of that, we’ve had simply five-ish years of upper than anticipated inflation, which additionally adopted a interval of unnaturally low inflation, proper? Within the 2010s. We had actually, actually low inflation by historic requirements and other people acquired used to that. We aren’t as a society used to excessive inflation. The final time we’ve seen this was within the seventies and eighties, and so most individuals alive as we speak, myself included, weren’t ready. We’re not used to or haven’t any body of reference for this sort of inflation, and we’ve now had it for five-ish years. The truth that now we have 2.4% inflation proper now’s comparatively excellent news.
That’s not a loopy excessive inflation quantity. However what individuals need, whether or not it’s lifelike or not, whether or not it’s good or not, is they need deflation. They need costs to go down. Now, most economists would let you know that’s most likely not a very good factor. What you need is disinflation and also you need the tempo of costs going as much as decelerate, however you don’t really need costs to go down as a result of that truly creates all these different financial issues. It removes the inducement to spend and proceed into this tailwind, or a minimum of that’s the idea. However theories apart, that’s what individuals need. Individuals need their grocery invoice to go down. And so shopper sentiment I believe is simply reflecting 5 years of frustration. Now, simply take into consideration this. If inflation had been at 2.4% in 2017 after years of low inflation, would anybody have even observed? I don’t even know if it could have made the information.
I’m saying this as a result of I simply suppose that the sentiment that’s out there’s a reflection of individuals’s worry about their jobs and worry about layoffs. That’s true, however I don’t actually suppose it’s an correct evaluation of what’s happening in inflation. I believe it’s a mixture about worry of the labor market and this cumulative impact of being above the Fed goal for 5 years. Have a look at the price of housing. Have a look at the price of groceries. There’s a motive persons are feeling GLO in regards to the economic system as a result of their pocketbooks are hurting they usually’ve been hurting for 4 or 5 years now, and I talked about this quite a bit in an episode again in November after I got here up with my idea of the traditional particular person recession. That is mainly my idea that yeah, GDP is rising. It’s been rising for years, however individuals really feel additional and additional behind.
And that’s as a result of GDP doesn’t actually measure the private funds of the common American. And as we will see, the common American isn’t feeling superb in regards to the economic system, and I believe we’re awfully near what I might name the traditional particular person recession. And though quite a lot of that is form of semantics, what’s a recession or not, the truth that persons are feeling much less assured about their financial prospects will weigh on housing, it’s going to weigh on the economic system. It simply does, and that is going to matter for actual property traders. It’s going to matter for each housing demand in case you’re attempting to promote a house. It’s additionally going to matter for rental demand. I don’t anticipate quite a lot of lease progress within the decrease ends of the market. I do know lots of people have mentioned that we’re working our method via the provision GLO and lease progress goes to be sturdy.
I’ve debated my good friend Scott Trench about this. He thinks it’s going to be tremendous sturdy. I’ve mentioned I believe it’s going to be fairly stagnant this yr, and I’m sticking with that. When you’ve got low shopper sentiment, persons are not as keen to go transfer into that new condominium or to cease residing with roommates or to maneuver out of a household dwelling as a result of they’re fearful both about inflation or in regards to the labor market. So I’m simply telling you all this as a result of I believe it’s clever to underwrite conservative proper now for each appreciation and rental progress. I’ve mentioned that earlier than. I do know persons are getting excited that now we have a brand new fed chair and that issues are going to go up and residential costs are going to go up. Perhaps that’s true, however I nonetheless suppose given what we’re seeing within the economic system proper now, the good wager is to be conservative proper now to not stretch too far on any deal, on any estimations of pink progress as a result of shopper sentiment is indicating individuals don’t need to spend that a lot proper now.
Now, there’s a optimistic flip aspect to this for actual property traders. If rental demand is just a little bit gradual, if persons are nonetheless going to be itemizing their properties, that implies that higher offers are going to be coming available on the market. Now we have seen indications of this all throughout the housing market. We’re speaking principally about macro as we speak and never in regards to the housing market, however simply as a reminder, stock is up about 10%. There was a current Redfin report that confirmed that consumers are getting the largest reductions they’ve gotten in additional than 13 years. So there are nonetheless good issues happening right here for actual property traders, however you should regulate your techniques. That is precisely why we take a look at this financial information each single month as a result of it helps us perceive what segments of the market are going to be sturdy luxurious. We’re seeing that top finish stuff continues to be doing nicely, and which ends of the market have the very best threat.
Now, I’m not saying issues are going to crash or that issues are falling aside, however the knowledge that now we have reveals us that there’s most likely not going to be sturdy lease progress and that on the decrease ends of the market, we’re most likely not going to see monumental housing demand. And in order that’s simply one thing you should take into consideration as you formulate your technique going into the spring shopping for season and as you make choices about your portfolio in 2026. For me personally, I’m nonetheless . I’m nonetheless taking a look at offers. I haven’t pulled the set off on something in 2026 but, however I’m seeing higher and higher offers. I really was speaking to James and Henry the opposite day. They mentioned they had been each loading up, was the precise phrases each of them utilized in completely different conversations. They each mentioned they had been unquote loading up on tasks Proper now. They appear optimistic about shopping for higher and higher offers, so there’s nonetheless good issues to be taking a look at. I simply need to level out the place alternative and threat is. That’s the entire level of the present. That’s the entire thing that we’re doing right here available on the market group. In order that’s it. That’s what we acquired for you guys as we speak. Thanks all a lot for listening to this episode of On The Market. I’m Dave Meyer and I’ll see you subsequent time.