This morning’s expectation-beating jobs report from the Bureau of Labor Statistics wasn’t just good for the economy, it was good for the housing sector, says Jed Kolko, chief economist for Trulia (TRLA).
“Overall, this was a great jobs report for housing. All three measures were strong,” Kolko says. “For now, at least, the job market is a tailwind for housing.”
Kolko said that residential construction employment is a strong measure of how job growth is going in the housing sector.
“Residential construction employment, including residential specialty trade contractors, increased by 20,100 in January versus one month earlier, and by 47,900 versus three months earlier. The three-month increase was the biggest in 23 months. Year-over-year, residential construction jobs are up 7.2%, ahead of overall job growth of 2.3%,” Kolko says. “But the number of units under construction was up much more: 17% y/y in December 2014. Why isn’t there more hiring? Because residential construction employment is still high relative to construction activity, even though multi-unit construction is an unusually high share of construction today (multi-unit construction needs fewer jobs per unit than single-family construction).”
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Doug Duncan, chief economist at Fannie Mae, expressed similar sentiments.
“The January jobs report marks a great start for 2015. The payroll increase of 257,000 in January, combined with upward revisions to the prior two months, pushed the 3-month average monthly gain to 336,000—the best since 1997,” Duncan said. “A 0.5% jump in average hourly earnings was a welcome signal to American workers that recent months of robust hiring may finally lead to a much needed rising trend in wage gains.
“The Fannie Mae January National Housing Survey, to be released next week, is expected to show that improving economic conditions are lifting consumer spirits and brightening views of their personal finances and the housing market. Together, our survey results and today’s jobs report strengthens our expectation that stronger hiring and firming income growth will be the primary catalysts for a faster pace of housing recovery in 2015,” Duncan said.
Kolko also points to job growth among millennials and in those metros hit hardest by the housing crisis.
“In this recovery, the virtuous cycle between jobs and housing has generally been weak,” he notes. “Young-adult employment rose yet again. Employment among 25-34 year-olds, the prime age group for housing demand, was at 76.6% in January — up from 75.8% one year ago, and the highest level since the end of 2008. It’s now halfway back to normal.”
On the clobbered metros, he noted this.
“Job growth in clobbered metros has been above the national level since mid-2011. Florida is leading the recovery among formerly hard-hit markets,” Kolko said. “Among clobbered metros, Orlando (+4.3%), Fort Lauderdale (+3.7%), Miami (+2.8%), and Phoenix (+2.7%) had especially strong year-over-year job growth, while Detroit’s job growth lagged (+0.8%).”