Fundamentally Speaking: Despite Disappointing Jobs Data, Economic Recovery on Track

In the latest edition of Fundamentally Speaking, Calvin Schnure, NAREIT’s vice president for research and industry information, said the economic recovery remains largely on track despite a disappointing August employment report.

Schnure noted that the gain of 142,000 new jobs in August was a “big disappointment,” especially since “all this year we’ve seen growing strength” with some monthly jobs reports well above the 200,000 level.

“I really don’t have anything good to say about the report. Not only was it below expectations, but you’re not seeing any improvement in labor force participation. Discouraged workers are not coming back into the workforce in the way that we were hoping for,” Schnure said.

If the August level of employment growth were to become a trend, Schnure observed, “then you would start to have some questions about the durability and vigor of this recovery.” He added that the data have forced analysts to reassess their forecasts and to look elsewhere for signs that either contradict or confirm the August jobs data.

At this point, Schnure said, he sees more signs of strength than of weakness in the economy. While there have been some weak numbers, such as  July retail sales data, “the other reports are pretty much on track.”

Schnure highlighted the trend in  consumer spending, pointing out that big ticket items were strong in August: “Consumers are going to continue propelling us forward.” He added that  consumer confidence is still reaching highs for the recovery.

Meanwhile, jobless claims are still very low, Schnure said. “What that’s suggesting is that this is more likely to be a one-month fluke in the data, rather than a sign of underlying weakness. We’re going to feel a lot more reassured, though, if we see jobs come back later in the year,” he added.

Overall, Schnure said commercial real estate is still seeing improvement across the market. Prices are trending upward, and price gains are spreading broadly across more markets, he said.

“That’s fairly favorable for the outlook, and it’s consistent with the sign that the overall economic recovery is gaining traction,” Schnure commented.

Furthermore, bank lending is rising.

“Banks are lending because there are deals coming along. This is a sign of a more normal recovery beginning to take place,” he said.