Jobs Fridays have become a spectator sport.

For big vested and invested stakeholders in market-rate housing, they recur – these days, like a chronic spasm of pain – as a proxy for would-be homebuyer payment power.

The better the "headline" jobs report, the likelier it is Federal Reserve policy setters will keep piledriving once-vibrant housing demand into a sorry shadow of itself.

Media splashed the negatives of this morning's release of the October employment report from the Bureau of Labor Statistics in dozens of stories like this one.

The latest US jobs report doused nascent optimism that the American economy was weakening enough to warrant a go-slower approach by the Federal Reserve in its battle against inflation.

Hiring topped estimates and wage growth accelerated more than expected last month, upending expectations that had built across Wall Street in recent weeks. Futures on the S&P 500 tumbled, the dollar surged and Treasury yields spiked higher.

“Earnings double expectations is a problem,” Bryce Doty, senior vice president at Sit Investment Associates, said. – Bloomberg

Wall Street Journal staffer Sarah Chaney Cambon articulates homebuilder and residential developer concerns here:

The job market has remained resilient this year, with employers still seeking to hire despite an uncertain economic outlook and elevated recession fears. Low unemployment and wage gains have helped fuel consumer spending, the economy’s main engine.

One big question is how long that strength can last as the Federal Reserve aggressively raises interest rates to tame inflation. Some companies in technology, entertainment and real estate are laying off workers, but demand for workers continues to outpace the number of unemployed people looking for work." – Wall Street Journal

The immediate focus of payment power angst for homebuilders is the direction and level of 30-year-fixed mortgage rates as they're impacted by Fed funds rates and the higher cost of lending period. More than doubling mortgage lending rates has effectively killed a 12-year housing recovery cycle fueled by structural, generational demand.

The calculus – given that the next step up in Fed funds rates, the ultimate peak rate, and the duration of the plateau at the peak rate remain unknowns – for homebuilders sorts out as a split between what they can do and what they have to have patience and staying power to wait it out.

For mathematically challenged buyers, builders have unleashed a blitz of financial levers to qualify as many "on the bubble" prospects as possible even as they try to drive their own costs lower to bring profitable asking prices back from their peaks.

More fruitfully, a discretionary buyer with the means and a number of other motivators – lifestage, family expansion, greater flexibility professionally, or a desire for a change of locale – probably has one big factor holding her, him, them back. Not wanting to make a move and then feel like a fool.

Remember, a very good single-family new-home market is between 1 million and 1.2 million homes sold and settled in a year.

Remember 2009? New home sales fell to 373,000, the lowest total since 1963.

No doubt, 2023 will not crash to anywhere near that depth. But in a downturn – even a bad one – sustaining sales and closings will come not from a demand torrent of millions, but a steady stream of tens of thousands.

For tens of thousands of 55-plus households, people on a relatively secure, success arc at work, people who've done well and are looking for that dream home in a new location, people who just inherited some money from parents or relatives, etc.

There's a baseline of them whose home purchase will be entirely discretionary. All they need is trust that they're not susceptible to being taken for a fool

Here's a piece we spotted today that may offer helpful perspective on exactly that issue. In times like now, skepticism is natural and that healthy skepticism goes hand in hand with your ability to earn your homebuyer's trust.

Inflation is more than just a company or customer problem, it is a societal problem. It affects the fabric of exchange, amplifying frustration with how the economy works. In particular, at times of high inflation customers become suspicious of “shrinkflation” (decreasing product sizes without customers’ knowledge) and “greedflation” (companies taking advantage of information and customer exhaustion to increase profitability rather than sharing the burden with customers). Together, these fuel a sense of what we call “doubtflation,” a growing loss in consumer trust in firms and markets as their ability to use prices to make decisions becomes more difficult." – Harvard Business Review

So, rather than getting reduced to being a "spectator" of a strong jobs report that may signal continued aggressive Fed interest rate policy, which, in turn, may continue to hammer housing, pivot.

Pivot to being a player who focuses first on winning the trust of people who're not swayed nor derailed by interest rate movements, but simply want to believe that the new home they purchase now, or in 2023, will be the value they expect.

There are hundreds of thousands of them who'll serve – once you've won their trust – as the floor of the market and the foundation for the next strong housing cycle.