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Real Estate Market Commentary - April 2015
by Peter L. Zachary, MAI, MRICS

The New York Times had an article on the front of the Business Day section on April 4, 2015 entitled: MARCH DATA SHOWS SIGNS OF SLOWING IN JOB GAINS. The yearlong streak of robust monthly job creation was broken on Friday with the Labor Department's report that employers added just 126,000 workers in March, a marked slowdown in hiring that echoed earlier signs that sluggish business investment and punishing weather were exacting a toll on the economy.

Analysts blame the plunge in oil prices as well as the pall cast by a difficult winter across the Northeast and Midwest, a combination that put a crimp on spending in the energy patch and held back by consumer spending and construction. Still this new report presents only a limited snapshot, and many say they expect the economy to regain at least some of its momentum later this year.

"The American energy industry is adjusting very quickly to low oil prices, and we've seen this in the counts of the rigs that are active," said Carl R Tannenbaum, chief economist at the Northern Trust Company. "The bad news is we're losing some jobs. The good news is, we hope, that the average consumer is saving a tremendous amount of money in lower gasoline prices."

The unemployment rate held steady at 5.5 percent. Hourly wages, one of the few bright spots of the report, rose.0.3 percent for private sector workers in March, after a meager 0.1 percent rise in February. But hours worked were down slightly, so overall paychecks were left essentially flat.

The slowdown in job creation reinvigorated the debate about when the Federal Reserve will raise interest rates above their near-zero level, where they remained since 2008. Many Wall Street analysts said the murky jobs picture was likely to reinforce the view among the Fedís more dovish policy makers that rates should stay put at least until the end of the summer because the economy may not be strong enough to stand on its own.

Speaking at a conference in San Francisco last week, Janet L. Yellen, the Fed's chairwomen, warned that the recovery was fragile, despite steady progress on the jobs front. She said that the Fed would move slowly to raise rates even after it began the process of lifting short term borrowing costs.

"For Yellen, this is an affirmation of what she did," said Diane Swonk, chief economist Mesirow Financial. "She said she wants to see more improvement in the labor market."

Luke A Tilley, chief economist a Wilmington Trust Investment Advisors, said: "For the Fed, this report decreases the probability of an interest rate increase at the June meeting."

In addition to the March numbers, government statisticians revised their previous estimate fro January and February, subtracting 69,000 jobs from the earlier figure, leaving the monthly average for the first quarter at just under 200,000.

After a year in which average job gains averaged 269,000 a month, the sharp slowdown brought a mix of dismay and puzzlement. Justin Wolfers, a senior fellow at the Peterson Institute for International Economics and a contributor to Upshot, an online analytical section at The New York Times posted on Twitter ; "If your favorite economist thinks they know what the economy is doing right now, they're overconfident."

Friday's disappointing figures, the weakest showing in two years, means it will take longer for the economy to reach a level most analysts consider close to full employment.

The Hamilton Project, an economic policy initiative at the Brookings institution, calculated that the nation still faces what it calls a "jobs gap" of four million, the number of additional jobs needed to reach prerecession employment levels.

Nonetheless, Mr. Tilley of Wilmington Trust remains optimistic: "Although disappointing, we don't think it portends a turnaround for the U.S. economy."

More to come next month. Read previous Real Estate & Housing Market News.

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