Eye on the Economy: Labor Market Gains are a Positive Sign for Housing


An improving labor market will help support growth in home building in 2015. And the November report offered the most positive jobs data in some time. According to the Bureau of Labor Statistics, 321,000 jobs (seasonally adjusted) were added to the economy in November, and the numbers for September and October were revised up by a combined 44,000. Prior to November, the average monthly gain in jobs for 2014 had been 233,000. The BLS data also indicated that the average workweek and hourly earnings improved.

Home builders and remodelers added 16,700 jobs to the economy in November, according to the BLS data. Over the last year, residential construction employment has grown by 122,000.

However, a separate labor market report on job turnover (the BLS JOLTS survey) revealed that the number of unfilled construction sector positions rose to 136,000 in October (the JOLTS data come with a two-month lag). This is the fourth-highest total for open construction jobs during the post-recession period and a demonstration of the challenge some firms in the industry have obtaining access to labor as construction activity expands.

Another industry headwind has been access to capital. While access to AD&C loans remains an issue, there are signs of gradual improvement. A quarterly NAHB survey on construction lending indicated easing lending conditions during the third quarter. These results mirror a broader Federal Reserve survey showing an improved lending environment for commercial real estate generally.

Data from the FDIC also show improvement: The stock of residential AD&C loans has grown by 17% since the third quarter of 2013. While the amount of lending has increased, there remains a gap between the amount of debt available for business purposes and the demand for new home construction.

And home building continues to expand. Census construction spending data reveals that in October, all three components of the residential construction industry showed growth. The pace of single-family spending (put-in-place) was up 1.8%, while multifamily (1%) and improvement spending (0.6%) also posted gains. On a three-month moving average basis, from October 2013, the annualized pace of total private residential construction spending has increased 1.3%.

Single-family spending will continue to grow in 2015, as pent-up housing demand is unlocked due to improved households balance sheets and ongoing growth in the labor market.

In analysis news, NAHB recently published research concerning the size, price and financing of homes purchased by various generations, with a focus on Millennials. New research also examined the changing patterns and types of residential energy tax credits that were claimed in recent years. Recently published numbers show that owners of newly built homes are more likely bike or walk to work. And lastly, NAHB economists wrote a short primer on why data, including housing numbers, are seasonally adjusted.


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