Economists: Latest jobs numbers good for economy, not so much for housing industry

Jobs increased by 223,000 in May, affordability and homebuilding still need help

As jobs increased in May, the unemployment rate dropped by 0.5 percentage point, falling to 3.8%, according to the latest Employment Situation Summary report from the U.S. Bureau of Labor Statistics.

Total non-farm payroll employment increased by 223, 000 in May, compared to the average monthly gain of 191,000 over the past 12 months. This an increase from April, when jobs increased by an upwardly revised 164,000.

“While this morning’s jobs report reads positive overall, wage growth is still far lower than it needs to be to enable working families to afford homeownership,” Redfin Chief Economist Nela Richardson said. “Hourly wages were up 2.7% in May from last year, less than half the rate at which the median home sale price increased.”

“With the typical home now costing more than $300,000 and interest rates on the rise, the pickup in wages only begins to chip away at the housing affordability crisis,” Richardson said.

One expert explained that the market is constantly adapting to challenges, therefore demonstrating the strength of the American economy.  

“Whenever a miss in expectations occurs, the labor market has been quick to self-correct," said Steve Rick, CUNA Mutual Group chief economist. “That’s exactly what we saw today, even if it causes some to suspend their disbelief given how little slack there should still be.”

“We’re in the second-longest period of job growth in American history, and it’s quite apparently that at the moment, our economy is quite healthy,” Rick said.

The majority of job gains in May can be attributed to an increase in jobs in retail trade, healthcare and construction.

Here are some of the areas which showed major changes in April [full chart, here]:

  • Employment in retail trade increased by 31,000
  • Employment in health care increased by 29,000
  • Employment in construction increased by 25,000

Employment in professional and technical services also increased by 23,000. Healthcare remained steady by a 29,000, which has been the average monthly gain for the last 12 months. Since a recent low point in October 2016, mining edged up 6,000 jobs, growing the industry to 91,000 jobs.

Industries that changed little over the month, including construction, wholesale trade, information, financial activities, leisure and hospitality and government.

“The great news is that the tightening labor market drove wages higher – 2.7% compared to a year ago,” Freddie Mac Chief Economist Sam Khater said. “Employment in the construction industry rose 4.1% over the past year, the highest rate since Feb 2017.”

“Not only did the construction industry add jobs at a strong pace, but the number of average hours worked increased by 0.4, one of the largest increases of any employment segment over the last year,” Khater said. “Hopefully this will lead to what the housing market desperately needs: more homebuilding.”

The average workweek for all employees on private non-farm payrolls remained unchanged at 34.5 hours in May. Average hourly earnings increased by $0.71 to $26.92.

The unemployment rate decreased to 3.8% in May, down the previous rate of 3.9%, according to the report. The number of unemployed persons declined from 6.3 million to 6.1 million in May.

This decrease was driven by the drop in unemployment rate for blacks, which decreased from 6.6% to 5.9% in May. The jobless rates for all other groups included adult men at 3.5%, teenagers at 12.8%, whites at 3.5%, adult women at 3.3% and Hispanics at 4.9%.

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