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Housing Recovery to Boost Jobs Growth: Goldman Sachs

Thursday, 14 Feb 2013 | 11:52 AM ET
Workers gather at a groundbreaking ceremony for the Hudson Yards development.
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Workers gather at a groundbreaking ceremony for the Hudson Yards development.

The housing recovery could be about to pay off in some new jobs.

Goldman Sachs economists, in a new report this week, forecast that residential investment-related employment growth should pick up this year and next, and could start to add jobs at a pace of 25,000 to 30,000 per month, compared to the average 14,000 per month of the last year.

"Even at this faster rate, it will take many years before housing-related employment attains its prior highs," they noted.

Layoffs in construction and other housing-related jobs were deeper than in other industries, and jobs have been slower to come back despite the improvement in housing activity, according to the report. "Although many indicators of housing activity improved during 2012, employment in the sector remains close to post-bubble lows," they added.

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Residential construction lost 1.5 million jobs, or 42 percent from the 2006 peak to trough in early 2011. Since the trough, only 100,000 have been replaced.

When adding in housing-related employment in manufacturing, wholesale trade, retailing and finance and real estate, employment dropped by 2.8 million, or 31 percent. Only 300,000 of those jobs have been restored since the trough.

(Read More: Housing AlreadyShows Signs of a New Bubble)

"Labor hoarding" may also be a factor contributing tot he slow pace of hiring. That is a pattern of declining productivity during a downturn when employers are reluctant to fire workers at a pace equal to their decline in sales. The result is slower hiring when sales pick up.

This phenomena should be waning, they noted, and at the same time hours per worker in the construction industry now exceeds pre-crisis highs, signal of future hiring.

(Read More: Mortgage Mess Mires Housing Recovery)

The economists expect real residential investment to continue growing at a roughly stable 10 to 15 percent rate in 2013 and 2014. They also looked at the relationship between construction activity and employment at the state level, including the relationship of building permits to construction jobs.

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