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Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Election Week Rally | Strong Jobs Report | Recounts Loom?

  • U.S. equity markets consolidated its Election Week gains on Friday as better-than-expected unemployment data this morning offset some lingering questions and concerns over the ultimate outcome of the election.

  • Ending the week with gains of over 7%, the S&P 500 finished fractionally lower today The Dow Jones Industrial Average pulled back 67-points but gained more than 1,800-points this week.

  • Finishing the week with gains of about 4%, Equity REITs (VNQ) finished lower by 0.8% today with 12 of the 18 property sectors in negative territory while Mortgage REITs (REM) declined by 1.3%.

  • Regardless of the ultimate outcome of the Presidential race, political power will be fairly evenly split in the new Congress as Republicans are poised to narrow the split in the House and will likely hold control of the Senate with a win in at least one of the Georgia Senate run-off elections in January.

  • The Bureau of Labor Statistics reported this morning that the U.S. economy added 638k jobs in October - slightly above economists' estimates for gains of 580k, but private payrolls solidly beat estimates with gains of 906k. The "headline" unemployment rate ticked down to 6.9% from 7.9% in the prior month, also well better than estimates.

Real Estate Daily Recap

U.S. equity markets consolidated its Election Week gains on Friday as better-than-expected unemployment data this morning offset some lingering questions and concerns over the ultimate outcome of the election. Ending the week with gains of over 7%, the S&P 500 ETF (SPY) finished fractionally lower today The Dow Jones Industrial Average (DIA) pulled-back 67 points but gained more than 1,800 points this week. Real estate equities were among the laggards this week on underperformance from the COVID-sensitive property sectors. Finishing the week with gains of about 4%, Equity REITs (VNQ) finished lower by 0.8% today with 12 of the 18 property sectors in negative territory while Mortgage REITs (REM) declined by 1.3%.

While 6 of the 11 GICS equity sectors finished in negative territory today, all 11 were higher on the week with the Technology (XLK) sector as the notable standout on the upside and the Energy (XLE) sector as the notable laggard. Regardless of the ultimate outcome of the Presidential race, political power will be fairly evenly split in the new Congress as Republicans are poised to narrow the split in the House and will likely hold control of the Senate with a win in at least one of the Georgia Senate run-off elections in January. We'll have a full analysis of this week's economic data and the impacts of the election results on residential and commercial real estate in our Real Estate Weekly Recap

The Bureau of Labor Statistics reported this morning that the U.S. economy added 638k jobs in October - slightly above economists' estimates for gains of 580k, but private payrolls solidly beat estimates with gains of 906k. The "headline" unemployment rate ticked down to 6.9% from 7.9% in the prior month, also well better than estimates. Even with the rebound of 12.1 million jobs over the last five months, however, total nonfarm payrolls are still roughly 10.2 million below pre-pandemic levels and the pace of the rebound has slowed in recent months. This follows ADP data earlier in the week which showed that 365k jobs were added in October, below expectations of 650k.

We've remained quite a bit more optimistic than consensus on the employment and economic outlook, urging investors not to underestimate the "unstoppable force" of WWII-levels of fiscal stimulus and the unprecedented levels of monetary support, both of which we expect to continue despite the stalemate in fiscal talks ahead of the election. There may still be some more "low-hanging-fruit" left in the rebound as roughly 50% of recent job losers continue to classify themselves as on "temporary layoff" totaling over 3.2 million, which is down from a peak of 18 million back in April. Encouragingly, permanent job losses declined sequentially for the first time since the start of the pandemic and are "only" about 2.5 million above pre-pandemic levels.

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