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Unemployment rate rises to 6.2% as job growth misses expectations

Housing industry experts not impressed with July numbers

flat tire

Total nonfarm payroll employment increased by 209,000 in July, well below the expected 230,000 and below June’s 298,000.

On the plus side, that number does keep pace with replacement, but not enough to make a dent in the sum of job losses over the past six years. It is the sixth month of replacement level job growth.

The U3 measure of unemployment crept up to 6.2%. The labor force participation rate rose by 0.1% to 62.9%.

Over the past 12 months, the unemployment rate and the number of unemployed persons have declined by 1.1 percentage points and 1.7 million, respectively.

This is not a hot streak but rather treading water.

Full-time jobs rebounded modestly, rising by 285,000 in July following June's 523,000 collapse, which was only made up for by part-time job growth of 779,000, showing a general weakness in the economy and raising serious questions about Wednesday’s optimistic 4% quarterly initial GDP report.

Average hourly earnings, rose just 2%, following a downward revision to June's 2% to 1.9%, below the 2.2% expected.

Jed Kolko, chief economist at Trulia (TRLA), looked at job growth in the residential construction, young adults and clobbered metros areas, and concludes that the July jobs report was solid enough but hardly a breakthrough for housing.

“Residential construction jobs moved ahead, and job growth in clobbered metros continued to improve, but young-adult employment still stagnates,” Kolko said.

Click the image to enlarge.

Kolko made the following observations:

Residential construction employment, including residential specialty trade contractors, increased by 13.0 thousand in July versus one month earlier, and by 28.4 thousand versus three months earlier. Those are solid but not stellar increases. Year-over-year, residential construction jobs are up 5.3%, ahead of overall job growth of 1.9%.

Young-adult employment was not so hot. Employment among 25-34 year-olds, the prime age group for housing demand, was at  75.6% in July, down from 75.8% in June and 76% in February. Young-adult employment is less than halfway back to normal: before the bubble, their employment-population ratio hovered in the 78-80% range – see chart below. 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.

Job growth in “clobbered metros” – those hit hardest in the housing bust -- was 2.2% year-over-year in June (released earlier this week), ahead of national job growth of 1.8% for the same period. Among clobbered metros, Orlando (+3.7%), Fort Lauderdale (+3.3%), and Las Vegas (+3.1%) had especially strong year-over-year job growth, while Detroit employment was flat year-over-year. Among all of the 100 largest metros, not just clobbered metros, job growth was highest in Grand Rapids MI (+5.0%) and lowest in Syracuse NY (-0.7%).

Doug Duncan, chief economist at Fannie Mae, noted concern average hourly earnings and average hours worked both flat. 

“Given this week’s market volatility, today’s jobs report put the economic backdrop in a sweet spot. The cooling pace of job creation (albeit a continued healthy gain), the uptick in the unemployment rate, and the lack of wage pressure should help soothe fears that the Federal Reserve may move forward its first rate hike to early 2015 from the consensus view of mid-year 2015,” Duncan said. “While recent economic reports support our view of steady economic growth in coming quarters, news from the housing and mortgage market has been less encouraging. Our July National Housing Survey, to be released next week, is expected to show lukewarm consumer expectations regarding housing, underscoring the fragile nature of the housing recovery following the spike in mortgage rates more than a year ago.”

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