Are record-low interest rates masking high-cost mortgage lending?

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Jobs data gives cold shoulder to cold weather excuse

Some nuggets of good housing news buried deep

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Digging deeper into January’s jobs numbers, one thing stands out – despite the claim for weeks that poor job creation, retail sales, manufacturing and production numbers were because of the cold weather — nothing of the sort is really happening.

Construction gained the most of all job sectors in January, picking up 48,000 jobs. In particular, as noted by Jed Kolko, chief economist with Trulia (TRLA), residential construction employment picked up in January.

“Residential construction employment, including residential specialty trade contractors, increased by 16,800 in January versus one month earlier, and 43,500 versus three months earlier,” Kolko writes. “That’s tied for the biggest three-month jump in construction jobs since the recovery began.”

Year-over-year, residential construction jobs (5.8%) increased more than employment overall (1.7%).

Which is odd considering all the winter weather and polar vortex talk. Not just odd but downright puzzling, unless they were construction snow forts.

Buried in the BLS reports, and available to play with here, a look at the historic number of people counted as “Not Working” due to bad weather for December and January was pretty much well within historic norms.

In fact, more people were not working due to the weather every winter since 2004 except for one year – 2006, according to the chart below.

 

Doug Duncan, chief economist, Fannie Mae, said while he saw bright spots, it was definitely disappointing.

“After stumbling at year-end with a sub-100,000 increase in total nonfarm payrolls, January’s hiring picture remained weak, showing a gain of 113,000,” Duncan said. “The lack of meaningful upward revision for December was disappointing, indicating that the labor market has softened substantially over the last two months.”

Meanwhile, in a report to clients regarding unemployment benefits – an extension of which stalled Thursday in the Senate – Nomura analyst Joseph Song wrote, “Our analysis shows that the individuals who have presumable exhausted unemployment insurance (UI) benefits prior to the close of the emergency UI program remained in the labour market, at similar rates as those who were still eligible for UI benefits. Estimates suggest that the expiration of UI benefits will have a limited impact on the unemployment rate and supports our forecast that it will reduce the unemployment rate by 0.3pp over the next two quarters.”

Kolko, though, was able to find more bright spots at least for housing.

Even better (than construction job growth), more young adultswent back to work. Employment among 25-34 year-olds, the prime age group for housing demand, jumped to 75.9% in January, up from 75.4% from one year ago and back to the highest level in 5 years,” Kolko said. “Still, the kids aren’t alright: before the bubble, their employment-population ratio hovered in the 78-80% range. Having a job matters for housing. Just 12% of employed 25-34 year-olds live with their parents, versus 20% of 25-34 year-olds without jobs.”

Further, Kolko noted, there was job growth in the “clobbered metros” – those hit hardest by the housing crash.

Growth was 2% year-over-year in December, ahead of national job growth of 1.7% for the same period. Kolko wrote that among clobbered metros, Orlando (+3.1%), Tampa (+3.0%), Fort Lauderdale (+2.7%), and Phoenix (+2.5%) had strong job growth. Among all 100 largest metros, job growth was highest in Grand Rapids (+4.9%), San Jose (+3.4%), and Houston (+3.0%), along with Orlando and Tampa. Cleveland (-0.6%) and Detroit (-0.5%) had the biggest job losses.

Duncan was likewise optimistic in the long run.

“Today’s report did not change our view that economic growth will pick up modestly this year, boosted by private sector activity,” Duncan said. “Over the past several years, the labor market showed this pattern of year-end volatility without dramatically altering the underlying steady pace of job growth.”

It’s not entirely clear that there has been a historical pattern of year-end volatility, or that there has been a “steady pace” to job growth.

If anything, it looks more like a series of false starts and stagnation.

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