Lawrence Yun, the chief economist for the National Association of Realtors, is warning that today’s mostly positive jobs report should not be embraced as evidence of an improving economy.
“The job market continues to crank out jobs in high figures: 336,000 in September and over 4 million more compared to pre-Covid-19 March 2020. It does not mean all is well,” he stated.
Yun defined the jobs data as “a lagging indicator as the firms will only make a job cuts decision after having cut costs in other areas.” He pointed to the commercial real estate sector for proof that the situation is anything but copacetic.
“Commercial real estate, in particular, is flashing warning signs,” he continued. “Net leasing on retail and warehouse spaces is slowing. The office sector is continuing to bleed with rising vacancy rates. Community banks, many with exposures to commercial real estate, are watching their balance sheets carefully. The fast-rising interest rates are breaking several sectors of the economy. The remaining sectors will also likely crack if the rate hikes continue.”
Yun added that the Federal Reserve needs to reconsider its fiscal policy as quickly as possible.
“Given that the inflation rate is already cooling, the Fed needs to stop raising rates and strongly consider cutting interest rates next year. That would be the soft landing without the net job cuts to the economy,” he said.