February 8, 2022 – The First Jobs of 2022. On Friday, the markets received the first important data of 2022—the January jobs report.

Economic Commentary

The First Jobs of 2022. If we called 2021 the “year of jobs,” the next question is, what will 2022 deliver as an encore? On Friday, the markets received the first important data of 2022—the January jobs report. Coming on the heels of the late January meeting of the Federal Reserve, you can be sure both the markets and the members of the Fed were watching closely.

So how did we do in January? The increase of 467,000 jobs was higher than expected. The number of jobs added was disappointing the previous month, but the unemployment rate fell and the number for December was revised upward by over 300,000 jobs in this report.  In January, the unemployment rate rose slightly to 4.0%, which means that more are entering the workforce — another good sign. The economy now has added approximately 19 million jobs since the pandemic caused a loss of 22 million in 2020. Wages grew by 5.7% on an annual basis, also stronger than expected. 

Certainly, the pace of wage growth will be as important to the Fed as the growth of jobs. The Fed has inflation in their crosshairs and their move to end their stimulus of the economy by tapering purchases of bonds and mortgages and putting rate hikes on the near-term table, is a response to the high level of inflation we have witnessed during the latter half of 2021. Any signs that inflation is waning as we move on could ease the pace in which the Fed tightens.

Weekly Interest Rate Overview

The Markets. Mortgage rates were stable in the past week, but edged up after the survey was released. For the week ending February 3, 30-year rates remained at 3.55%. In addition, 15-year loans fell to 2.77% and the average for five-year ARMs increased slightly to 2.71%. A year ago, 30-year fixed rates averaged 2.73%, more than .75% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “The economy lost some momentum in January, leaving mortgage rates unchanged from last week and relatively flat for the third consecutive week. This stagnation reflects the economic impact of the Omicron variant of COVID-19, which we believe will subside in the coming months. As the economic recovery continues going into the spring and summer, mortgage rates are expected to resume their upward trajectory. In the meantime, recent data suggests that homebuyer demand continues to be elevated as supply remains low, driving higher home prices.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

Homeownership is seen as the largest source of wealth among families, with the median value of a primary residence worth nearly 10 times the median value of financial assets held by families. A recent Economists’ Outlook blog posted by Scholastica Cororaton, Research Economist for the National Association of Realtors (NAR), on NAR.com, found that at the national level, homeowners who purchased a single-family existing home 10 years ago have gained an average of $225,000 in home equity if the home was sold at the median sales price of $363,100 in Q3 of 2021. These gains in home equity come from paying down the mortgage and from appreciation in home prices. According to compounded annual growth rates, some 86% of the gains come from price appreciation of $193,600, and principal payments totaling $31,300. Over a 10-year period, home prices have increased 7.9% annually, a stronger appreciation compared to the 4.2% annual price pace in the past 30 years. The past five years have seen increasingly rapid price appreciation. Nationally, median single-family existing-home sales rose 8.5% annually from 2016 Q3 through 2021 Q3. A homeowner who purchased a typical home five years ago would have accumulated $144,400 in home equity, of which $121,800 resulted from price appreciation, or 84% of total home equity gains. Over a 30-year period, a homeowner who purchased a typical single-family home would likely have accumulated $354,400 in home equity, with $258,700 in housing wealth home price gains accounting for approximately three-quarters of the gain, with the typical existing-home sales price increasing by 4.2% annually. Source: DSNews

The surge in U.S. retirements during the Covid-19 pandemic was led by older White women without a college education, according to research by the St. Louis Federal Reserve. The so-called Great Retirement trend that saw workers leave the labor market — whether forced or by choice — was driven by baby boomers aged 65 and older, the regional Fed bank wrote in a recent blog post. By contrast, retirements among those aged 54 to 65 were little changed. Overall, there were 3.3 million, or 7%, more retirees as of October 2021 than in January 2020, a number that exceeds the expected demographic shift of the large baby-boomer cohort out of the labor force. Americans retired early for many reasons during the Covid crisis, including because they lost their jobs, feared for their health or had to care for family members. Another factor was the boom in the value of assets such as investments and real estate, which gave some Americans an opportunity to stop working earlier than they anticipated. Unlike in other developed countries, retirement isn’t necessarily a permanent shift in the U.S. It’s not uncommon that Americans “un-retire” and return to the job market, out of financial hardship or personal choice. “We find that the current increase has mainly been driven by a decline in the number of retirees rejoining the labor force,” Jun Nie and Shu-Kuei X Yang, economists at the regional Fed bank, wrote in a report last year. “Even if monthly transitions from retirement to employment return to their average pace in 2018–19, it will take more than two years to fully unwind the recent increase in the retirement share,” they wrote last August. Source: Bloomberg

CoreLogic, Irvine, Calif., said single-family rent growth reached 11.5 percent year-over-year in November, continuing its dramatic climb. For comparison, SFR rent prices were increasing at a 3.8 percent in November 2020. “Improvements in the economy and job market have helped push single-family rent growth to record levels,” said Molly Boesel, Principal Economist at CoreLogic. But Boesel noted rapid increases in single-family rents have eroded affordability, especially for lower-priced properties. CoreLogic examined rent price tiers. It found properties with rents priced at 75 percent or less of the regional median saw 10.4 percent rent growth year-over-year, up from up from a 3.1 percent rate in November 2020. The highest-priced properties, those priced at 125 percent of the regional median or above, saw 11.7 percent year-over-year rent growth, up from 4 percent in November 2020, CoreLogic said. Annual rent price growth has continued to double and even triple in the last several months, the report said. “This rapid acceleration in rent growth has added to the heightened concerns around inflation for both consumers and federal and local governments,” CoreLogic said. “The impact will likely continue to put upward pressure on inflation over the coming year as rent growth is fully reflected in the inflation measure.” Source: CoreLogic