Eye on the Economy: Hiring Gains a Positive for Housing


Good employment data offer a positive for housing as the market transitions from summer to fall. According to the Bureau of Labor Statistics (BLS), 248,000 net jobs were created in September. August gains were revised from a disappointing 142,000 to a slightly better 180,000, while July’s tally was also revised from 212,000 to 243,000.

The separate BLS household survey indicated that the unemployment rate declined from 6.1% to 5.9% in August, although a quarter of this decline was due to a drop in the size of the labor force. Nonetheless, brighter job market conditions are a hopeful sign for both rental and owner-occupied housing demand.

September was a promising month for residential construction employment. The BLS data reveal that home builders and remodelers added 11,800 positions last month. Over the last year, residential construction employment has expanded by 129,000 jobs.

Current employment now stands at 2.307 million (678,000 builders and 1.63 million residential specialty trade contractors). Since the low point of industry employment after the Great Recession, 323,600 jobs have returned to the sector.

Open jobs in the overall construction sector declined in August (the BLS job openings data come out with a one-month lag) due to an increase in hiring during the summer. According to the BLS JOLTS survey, the count of unfilled construction positions declined from 139,000 in July to 115,000 in August. The three-month moving average open position rate (open positions as a share of total employment) held constant at an elevated 2.2%. A rising open jobs rate for construction over the last two years is consistent with reports of labor shortages.

The August JOLTS survey found that the total open job rate for the overall economy rose to 3.4%, the highest mark since 2007. This increase signals good news ahead for job creation and housing demand.

Improved hiring should continue the growth witnessed in the multifamily sector. Non-seasonally adjusted three-month absorption for first-quarter 2014 rental apartment completions held steady at 62%, the same percentage reported a year earlier. Absorption rates for rental apartments rose coming out of the recession but have established a more stable range since 2011. The three-month absorption rate for for-sale multifamily condos completed at the start of 2014 was 80%, slightly lower than the 82% reported a year prior. However, the count of for-sale multifamily completions remains very low (1,800 in the first quarter, for example).

Labor market conditions are a key determinant of future monetary policy. Analysis of minutes from the September Federal Open Market Committee (FOMC), the Fed’s monetary policy authority, indicate that there are enough positives for the current economy that the Fed will likely announce the end of its asset purchase program (quantitative easing). However, the FOMC identified enough items of concern that it seems likely that the federal funds rate will remain low for a considerable time. NAHB is forecasting the first increase for the third quarter of 2015.

While low interest rates are helping to support housing demand, an August NAHB survey is also a reminder that low rates are only a benefit if a borrower can obtain credit. The survey found that 55% of single-family builders reported mortgage lending standards as tight or very tight.

Among the respondents, 83% reported they had lost at least one sale in the last six months the prospective buyer failed to qualify for a loan. The average share of sales lost was 9.7%, which suggests about 18,700 lost new home sales from February to July due to tight credit conditions.

In analysis news, NAHB economists have published a number of articles on 2013 new home characteristics. These include price per square foot differences, custom home market shares, and foundations types, all with a focus on regional differences. Another item of research reported average real estate taxes by state, with New Jersey leading the list. Lastly, an examination of the ownership of Energy Star-rated appliance found that new homes were more likely to possess such energy-efficient features.

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