Jobs Report Signals More Trouble for Housing
The weaker-than expected jobs report for Maydoesn’t bode well for the overall economy, but for housing it is far more foreboding. From construction, to local economies, even to age segments, the numbers are going in the wrong direction.
“The May 2012 jobs report was a step backward for housing in every way,” says Trulia.com’s Jed Kolko, who pinpoints what he calls “clobbered metros.”
These are the areas with the biggest home price declines during the housing crash and which now have the highest vacancy rates.
“Job growth in clobbered metros was just 0.7 percent through April, slower than the national average of 1.5 percent for the same period,” Kolko adds, citing data from a report earlier this week.
The construction sector lost 28,000 jobs, down 3.3 percent from three months ago. This may point to lower housing starts over the summer, despite gains this spring.
We are already seeing a drop in building permits, which were down 7 percent in April, even as housing starts rose just over 2 percent.
But in another report out today from the U.S. Department of Commerce, construction spending rose 0.3 percent, after also rising in March. That was largely driven by housing, with homebuilding outlays rising 2.8 percent to the highest level since October, and that includes a 3.7 percent jump in home improvement.
Construction may have gotten a boost in the spring, but the drop in jobs signals a potential setback.
“The recent trend is reminiscent of the monthly patterns of the spring slowdown witnessed over the last two years that continued through the summer months. If this pattern recurs, we expect that hopes for a meaningful housing recovery will be delayed once again,” says Fannie Mae’s chief economist Doug Duncan, who also notes that signs of improving consumer sentiment in housing is unsupported by today’s data.
Employment among younger Americans could be the only bright spot in today’s jobs report.
Among 25-34 year-olds, the unemployment rate ticked up from 8.1 to 8.2 percent; however, given the large increase in the size of the labor force in May, the fact that it held relatively steady is good.
Younger adults, who are the primary driver of first-time home buying, had a far higher unemployment rate in recent years than the overall population, but now that cohort appears to be recovering more quickly.