Strong Construction, Hospitality Hiring Suggests More Rate Hikes

department of labor, Economy, hospitality, housing market, retail

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Employers continued hiring at a relatively robust pace in September, with notable gains seen in two real estate sectors: leisure and hospitality, and construction.

The pace of hiring will likely keep the Federal Reserve — which is trying to stem inflation by cooling the economy — on track for another round of interest rate hikes at its November meeting, economists predicted.

“We expect the Federal Reserve will increase rates by at least another 50 basis points,” Mike Fratantoni, chief economist at the Mortgage Bankers Association, said in a statement, adding that the Fed “could do more if inflation fails to decelerate.”

The leisure and hospitality industry added a substantial 83,000 new jobs last month, although it employs 1.1 million, or 6.7 percent, fewer people than prior to the pandemic, according to statistics released by the government Friday.

Construction firms hired 19,000 workers last month as unemployment in the industry fell to a near-record low of 3.8 percent, according to Nick Grandy of Chicago-based consulting firm RSM.

Employment levels changed little in retail last month, although job openings in the industry fell by 143,000 through the end of August, an indication that many openings are being withdrawn rather than filled.

“This does suggest that employers are first moving to eliminate those openings and slow the pace of hiring before turning to layoffs as the economy cools,” said Fratantoni.

Overall, the U.S. economy added ​​263,000 jobs in September, for an average monthly gain of 420,000 jobs this year, while the unemployment rate edged down to a historically low 3.5 percent.

While fast-rising mortgage rates have begun tamping down the housing market, the increasing cost of renting has contributed to inflation, bolstering the case for further rate hikes.

“We are now in the seasonally slow period in the year for renting (September through March) so perhaps residents will have a bit of negotiating power with landlords,” Al Otero of Armada ETF Advisors, which sells investments in residential REITs, said by email.

“However, overall market conditions will likely remain quite tight,” he said, with apartment vacancies near all-time highs and homeownership still out of reach for many.

Workplace attendance improved significantly last month, with just 5.2 percent of workers doing their jobs remotely, down from 6.5 percent in August, a figure that reached as high as 35 percent in May of 2020.

Average hourly earnings for non-government workers rose by 10 cents last month to $32.46, making for an annual wage increase of 5 percent. Meanwhile, price inflation sits at 8.6 percent as of August.

Notably, wage growth in leisure and hospitality decelerated in September.

“Leisure and hospitality is kind of a residual sector of the labor market,” Columbia Business School researcher Justin Bloesch wrote on Twitter. “It soaks up workers if demand is low, but workers leave it if they get better jobs.”

“This makes wage growth in L&H a really good indicator of labor market tightness,” he added. “Tightness is falling.”



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