• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Real Estate

Jim Cramer: What to Look for In Friday's Non-Farm Employment Report

The labor participation rate, and not the employment number itself, may be the key 8:30 a.m. figure.
By JIM CRAMER Apr 05, 2018 | 12:21 PM EDT
Stocks quotes in this article: LEN, PHM, KBH, TOL, DHI

On Friday we get a number everyone fears: the Labor Department's Non-Farm employment report. Ever since the economy turned up we have found ourselves in an environment where the stronger the number the more fears we have that the Fed will accelerate rate hikes and derail the economy.

Now, we know that's good for the banks; they make more money off your deposits with every rate hike. That's got huge bottom line potential for all banks because they basically do nothing on a new rate hike to earn the additional profits.

But higher rates are certainly tougher for business in general and, most important, in particular, housing. In fact, I believe a strong employment number would be met with a massive amount of selling in the homebuilders, the most rate sensitive group.

But, perhaps that view is out of date. Perhaps we are dealing with a different set of circumstances that makes being fearful of a strong employment number just plain old fashioned and antediluvian versus the Great Recession.

What makes me so confident that we may be looking at tomorrow's number the wrong way? Simple: the conference call earlier this week of the largest homebuilder in the country, Lennar (LEN) .

First it was a total tour de force, sending the stock up from 57 to 64..

Second, the main reason for the rise had to do with the explanation that long-time CEO Stuart Miller gave for why his business is so strong: the labor participation rate. That, and not the employment number itself, may be the key 8:30 a.m. figure.

Take a listen to what Miller said: "So look, interest rates tend to be a kind of flashpoint for homebuilding, but it is never properly contextualized." He continues: "Interest rates go up within the context of an environment, and the environment right now is one of low unemployment and generally wage growth. And what is not talked about enough is participation rate. Labor participation rate improvement. What we're seeing in the field is that more of our customers are coming in with confidence. They're coming in with certainty about higher wages." In other words, he's saying that the easier it is to get a job the better the homebuilding business is and those trends "tend to really offset the impact of a higher interest rate," so focus on participation rate not whatever rise that might come from interest rates.

Frankly this was stunning logic to me. I know that we are building far fewer homes than we used to and we are very supply constrained nationwide. I know that only the big homebuilders like Lennar, Pulte (PHM) , KB Home (KBH) , Toll (TOL) and DR Horton (DHI) can really navigate the changes in environmental laws that so restrict new homebuilding. The effect of the new tax law is to stimulate the economy and that is good for the homebuilders, as does the doubling of the standard deduction which Lennar tells us is allowing apartment dwellers to accumulate savings they need for a down payment.

And the changing fortunes among millennials has to be noted given that the ease with which jobs can be found has allowed a new generation to finally move out of their parents' homes and get one themselves, just in time for multiple children.

Yet, the revelation that we are looking at the wrong number tomorrow is what gives me hope that even if we start the surge toward 3% on the ten-year treasurys again, we shouldn't rush to sell these stocks and others connected with the home including retailers geared toward home spending and home investment.

Perhaps, instead, we should be buyers. That's a huge and welcome change, one that is so different from the selloff we got in February on the last hot employment number. I always say that panic should not be a strategy. If we see a large change in the participation rate, and Lennar and the other homebuilders get hit anyway, these all domestic businesses may be just the right stocks for this new anti-international trade environment.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Basic Materials | Real Estate | Economy | Markets | Stocks

More from Real Estate

Dozens of Stocks Suspended in Hong Kong Due to Problems in Accounts

Alex Frew McMillan
Apr 1, 2022 9:00 AM EDT

After missing yesterday's deadline day for filing full-year 2021 figures, many Hong Kong-listed, China-focused companies saw their shares stop trade.

Chinese Property Stocks Leap But Red Flags Abound

Alex Frew McMillan
Mar 30, 2022 9:48 AM EDT

There's a mounting list of Chinese developers that say they can't file their 2021 annual accounts in time, a likely sign of deeper trouble.

Buyer Beware on China Stocks

Kevin Curran
Mar 23, 2022 3:45 PM EDT

Intrigued by the wild swings in many of these stocks? Caution is warranted.

Let This Value Investor Take You on a Wild Ride to Argentina

Jonathan Heller
Mar 4, 2022 11:00 AM EST

From time to time when it has appeared to be cheap enough, this has been a rewarding foray into a risky world.

Is Simon Property Group a Safe Haven in This Market Environment?

Bruce Kamich
Feb 7, 2022 1:42 PM EST

SPG reports earnings after Monday's market close.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:24 PM EDT PAUL PRICE

    An interesting chart

    I'm betting heavily that stocks will be way up aga...
  • 10:10 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "Market Timing for Dummies"
  • 01:44 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10 Portfolio

    We're making a series of trades here.
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login