There Are 2 Employment Trends I'm Watching Closely

We got the May Jobs Reports this morning. It showed that there were 559,000 jobs created in the month. While that was approximately 90,000 jobs below expectations, it was a good sight better than the April Jobs Report which incorporated the second biggest miss against the consensus in the history of this key and much anticipated BLS report. As an investor in both stocks and real estate, there are two employment trends I am watching closely right now. The first is how fast the nation gets back to the pre-pandemic level of employment. From both an anecdotal level and from dozens of conversations with small business owners, I believe the enhanced federal unemployment benefits have been a major drag in getting jobs filled in many industries. This is especially true in hospitality, restaurants, retail, and some construction and manufacturing. It is also why the country has a record amount of job openings right now. This in turn has been a key factor in wage hikes that have been a significant contributor to the signs of rising inflation we have seen in recent months as well as a factor in supply bottlenecks. Both are major concerns for the market. We should have a better clue on how big of a driver this has been to job growth in coming months as roughly half the states in the nation have started to ween off these additional unemployment outlays. Down here in the Sunshine State, we are scheduled to no longer take these additional benefits on June 26th. If we see a divergence in job growth between the states that have chosen this path compared with those that haven't, more states should follow this policy. Or at least, hopefully, we can avoid extending these benefits even further past their September expiration date at the Federal level. The second unknown in the labor market, is how quickly mostly white collar workers will return to the office. The pandemic triggered an explosion in the virtual workforce. Most of those workers will return to their work cubicles in coming quarters. However, the work from home crowd will remain much larger than it was before the lockdowns instituted during the outbreak. There was a report on Bloomberg the other day on why many people are either quitting or plan to quit previous positions if it involves the long commute to the workplace that was part of their life prior to 2020. Obviously, how fast and how many office workers actually return to their previous work lives will have ramifications for commercial real estate as well as regional economies. This will also be a crucial factor on how fast 'normalcy' returns to major cities like New York where each office worker in Midtown supports myriad positions in other industries that serves this workforce. It is also one key reason, along with surging crime rates, why I continue to believe the Big Apple's rebound will be much slower than that from 09/11 or the financial crisis. Therefore, I continue to be pessimistic about both growth in residential or commercial real estate value in these major cities and have little to no exposure to this in my personal portfolio. I also will continue to be long real estate here in South Florida where the migration out of these high tax, population dense cities will continue to be a key driver for real estate values here. Hopefully, these exiles bring good pizza and good bagels, which are some of the very few things lacking here down south.

There Are 2 Employment Trends I'm Watching Closely

I continue to be pessimistic about both growth in residential or commercial real estate value in major cities.

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