Employment is good for housing. No question. But it is just not as simple as that when it comes to today's unique housing recovery. This recovery needs more construction, more jobs for younger Americans, and more credit. Friday's October jobs report provided none of that.
Employment among 25- to 34-year-olds, considered the prime age for housing demand, fell from 75 percent in September to 74.6 percent in October, according to the Bureau of Labor Statistics. It is still well below pre-recession levels.
First-time home buyers, usually younger Americans, have been largely left out of this recovery, buying at far lower rates than normal. Not only are they un- or underemployed, they are saddled with student loan debt and lacking the credit to qualify for today's lowest mortgage rates.
(Read more: Shutdown slowdown? Job creation soars in October)
Construction didn't do so well either. Residential construction jobs increased by 4,800 in October, month-to-month, and are up by 14,000 from three months ago. Still that three-month gain is the smallest increase in 12 months, and residential construction employment remains low by historical standards.
"Even though home prices have rebounded strongly and are now close to 'normal' levels, construction still lags. New home starts and construction employment are still way below their pre-bubble norm and face a long, slow climb," said Jed Kolko, chief economist for Trulia.
The jobs numbers also do not bode well for mortgage rates. A stronger employment picture makes the case for the Federal Reserve to slow its purchases of mortgage-backed bonds. Fear of the so-called "taper" was allayed during the government shutdown and debt crisis deadlock, but quickly reared again after Friday's strong employment report.
"Bond markets tanked immediately following this morning's jobs data. Today's rates will be at least an eighth of a point higher than yesterday, and as much as a quarter of a point for some borrowers," said Matthew Graham of Mortgage News Daily.
(Read more: Credit cuts out would-be homebuyers)
Average quoted rates for those with pristine credit and large down payments will now be 4.375 to 4.5 percent, compared with 4.25 percent Thursday, a substantial one-day move.
"Today's jobs data fuels speculation that the Fed will reduce asset purchases at that meeting rather than wait until March, as the last survey of Primary Dealers suggested," added Graham.
Higher rates will also mean more mortgage-related job cuts, as volume drops. The mortgage banking and brokerage sectors of the economy lost 6,000 jobs in September, according to an analysis by Inside Mortgage Finance, and likely shed more in October. Mortgage applications are down 42 percent from a year ago, driven by a 52 percent drop in applications to refinance. Applications to purchase a home are flat.
While the strong overall employment report is easing concerns that the partial government shutdown hurt the economy, consumer sentiment clearly took its own hit, especially when it comes to housing. The share of consumers who said it is a good time to buy a house in October fell to 65 percent, an all-time low for Fannie Mae's monthly National Housing Survey, which began in 2010.
"Housing market sentiment has clearly suffered in the wake of the recent government shutdown and debt ceiling debate," said Doug Duncan, chief economist at Fannie Mae. "While this decline in consumer optimism may portend a slowing of the housing recovery, supply constraint data suggest that we are likely to see continued positive growth in home prices."
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Higher prices, though, are also a double-edged sword. They bring more potential buyers and sellers out from underwater on their mortgages, but they also price out more buyers, especially those crucial first-time buyers.
—By CNBC's Diana Olick. Follow her on Twitter @Diana_Olick.