Disappointing jobs data riles housing experts, economist
June's anemic job growth riled housing economists Friday, prompting many of them to lower expectations for home sales and home prices in the second half. Further, the topic of Friday's jobs report dominated most Twitter feeds from experts in the industry.
The economy added a meager 18,000 jobs in June as the unemployment rate inched higher to 9.2%, the Labor Department reported.
"The disappointing news on the labor front will only serve to further damage already depressed consumer confidence and demand for housing," said Doug Duncan, chief economist for Fannie Mae. "While home prices have stabilized recently going in to the spring-summer selling season, this report bodes poorly for house price expectations."
"June's U.S. employment report doesn't have a single redeeming feature," according to Paul Ashworth, chief U.S. economist for Toronto-based Capital Economics. "It's awful from start to finish."
Duncan with Fannie Mae said doubts are now raised about whether the second half will see much improvement. Housing economists have said for months that housing is not an isolated issue, but a symptom of an economy unable to fully revive itself as long as Americans lack confidence in long-term employment prospects.
Many market observers tweeted dire scenarios and revised forecasts following the Labor Department's report.
Nouriel Roubini, an economist at NYU's Stern School of Business well-known for his predictions of economic trouble, said the numbers are indicative of future stress. "(The) labor market (is) in a slump dashing the hopes this is a temporary soft patch," he wrote on his Twitter account. "It is rather a deep ugly swamp."
"This jobs number confirms my fear that we are in a deflationary spiral a la Irving Fisher due to a drop in leverage in the financial section," tweeted banking expert and Institutional Risk Analytics co-founder Chris Whalen.
David Leonhardt, an economics columnist for The New York Times, noted via his Twitter account that the share of adults with jobs dropped to 58.2%, a figure he said was tied with Dec 2009 and Nov 2010 for the lowest since the recession began. This figure is also the lowest since 1983, he tweeted.
On Thursday, Automatic Data Processing Inc. said private-sector employment rose by 157,000 in June, well ahead of analysts' estimates. But some market participants have begun doubting the ADP data as an accurate indicator of government data. Steve Liesman, senior economics reporter for CNBC, reported Friday that the ADP figure has been off by at least 32,000 for the past seven months when compared to Labor Department data.
Ashworth at Capital Economics said his firm "had been expecting a pick up in employment growth after the more upbeat ADP report, but what we got instead was a much weaker figure (the consensus forecast was 105,000) and a downward revision worth 44,000 to the gains in April and May."
Curtis Long, staff economist at the National Association of Federal Credit Unions, said the economy needs "125,000 to 150,000 new jobs per month just to absorb new entrants to the labor market."
"It looks likely that it will be some time before monthly job gains are at a a level sufficient to reduce the unemployment rate," according to Long.
Prior to Friday's report, consumer confidence was already low, according to Duncan.
"Our June housing survey showed a marked deterioration in consumer expectations of home prices over the next year—their weakest outlook since monthly tracking began a year ago," he said. "The lack of sustained, robust job growth continues to push out into the future the time that we can expect the housing market to heal."
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