articles about “jobs”
Oops! Manufacturing Not Leading Recovery.
Sorry, Obama. Despite making the push for more manufacturing jobs in his State of the Union address, a new employment projections report is betting on service and construction industries.
In last week’s State of the Union speech, President Obama gushed about manufacturing. He envisioned “an economy built on American manufacturing” and told us of the “huge opportunity at this moment to bring manufacturing back.”
But before unemployed machine operators and homeowners in factory towns get their hopes up, hear this: Obama’s speechwriters didn’t check with Obama’s experts. This morning, the Bureau of Labor Statistics released the official employment projections for the next ten years. What do the numbers say? Manufacturing will look more like the caboose than the engine of the economy. These projections deliver hard truths about manufacturing that the government, job-seekers and house hunters need to keep in mind:
- Manufacturing shrinks even as the economy grows. Manufacturing jobs are projected to slip by 0.6% between 2010 and 2020, even though overall jobs will grow by 14.3%. That means that manufacturing will drop from 8.1% of all jobs in 2010 to 7.0% in 2020. The decade will be especially grim for apparel and leather manufacturing, both of which will shrink by more than half. Because manufacturing productivity is high, it accounts for a much bigger share of output in dollars than of jobs. Even so, manufacturing’s share of overall output will also drop, from 19.2% in 2010 to 17.6% in 2020. No matter how you slice it, the economy is not built on manufacturing today and won’t be in 2020.
- Lots of jobs in manufacturing industries are really service jobs. Only 56% of jobs in manufacturing companies involve making or fixing actual stuff, what the government calls production, installation, maintenance, and repair occupations. (If you’re doing the math, that means only 4.5% of jobs in the U.S. involve making or fixing stuff in manufacturing industries.) What’s the rest? Service jobs: management, finance, sales, office support and so on. And don’t look to high-tech manufacturing for production jobs, either: just 32% of jobs in the computer and electronics manufacturing industry involve production, installation, maintenance or repair.
- The fastest growing sectors are service industries and a construction rebound. Professional services, education and health care will be the fastest growing sectors through 2020, along with construction. The fastest growing occupations will include higher-wage jobs like biomedical engineers, diagnostic medical sonographers and market research analysts, and lower-wage jobs like personal care and home health aides and construction helpers.
What does all this mean for housing? Over the long run, housing demand, sales, and home values go up in cities where there’s job growth. And local job growth depends a lot on which industries happen to be there: when high-tech booms, Silicon Valley and Austin grow; when the car industry melts down, Detroit suffers. The continued decline of manufacturing in America means rough times for housing markets in manufacturing cities.
Where are the manufacturing jobs? Manufacturing is relatively big in Midwest metros like Grand Rapids, MI, Gary, IN, and Milwaukee, WI, and also in southern spots like Greensboro, NC, Greenville, SC, and Louisville, KY. At the other extreme, there are almost no manufacturing jobs in south Florida or in the big east coast centers of New York, Washington and Boston. But the overall picture for long-term job growth and housing demand is not just about where manufacturing is – it depends on how fast all local industries are growing. I’ll do a deeper dive on longer-term growth soon. Stay tuned.
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Jobs Report Bodes Well for Housing
The November jobs report was good news for the economy and even better for housing: unemployment among 25-34 year-olds fell to 9.2%, and quarterly job growth in “clobbered cities” was strong at 1.9% (annualized rate). However, construction employment slipped.
Economic recovery is essential for housing demand to pick up. But three indicators in the monthly jobs report tell us whether the recovery in housing demand is underway, approaching or still far off. These include:
- Construction job growth
- Unemployment among 25-34 year-olds
- Job growth in cities clobbered by the housing bust
Construction job growth
Construction jobs are at the heart of the virtuous or vicious cycle that connects jobs and housing. Housing demand leads to more jobs in construction and related industries, and more jobs means more income and housing demand.
In November, construction employment fell month-over-month and grew just 0.3% versus 3 months ago, compared with total employment growth of 1.3% (seasonally adjusted annualized rates). Total employment is up 1.9% from its recession low, but construction employment is up just 0.8% from its bottom in January 2011 (cumulative rates). Construction employment still has a lot of catching up to do to get back even to its pre-boom share of overall jobs.
Unemployment among 25-34 year-olds
Between the ages of 25 and 34 is prime time when many people form households with a spouse, partner, roommate, or by themselves, then start families and buy their first home. During and after the recession, household formation dropped for this age group, and more of them than ever are living with parents or other adults rather than renting or owning their own place. These folks will wait to form their own households and consider homeownership only when their job prospects improve. A key measure for housing demand and homeownership is the unemployment rate for this group and the share of this age group that is employed.
In November, the unemployment rate for 25-34 year-olds dropped sharply to 9.2% from 9.8% in October and is at its lowest level since early 2009 (except for a one-month dip this March). The unemployment rate for all adults also dropped, from 9.0% to 8.6%. In November, 73.9% of 25-34 year-olds were employed (the rest are unemployed or not in the labor force because they’re in school, discouraged from looking, or not looking for other reasons), up from lower September and October levels, so the unemployment drop is not primarily due to young adults leaving the labor force.
But the job market remains tough for this key age group: before the recession, unemployment for 25-34 year-olds followed the overall rate pretty much exactly, but has remained stubbornly above the all-adults rate even as the unemployment rate has drifted down slowly.
Job growth in “clobbered cities”
The housing bust had unequal effects nationally, with many local markets in Florida, the Southwest, inland California and Michigan facing some of the largest price declines and highest vacancy rates. Job growth anywhere will boost housing demand, but compared to other places, these clobbered cities are in more desperate need of motivated homebuyers to help their local housing markets recover. We define “clobbered cities” as metro areas where home prices dropped at least 30% during the bust (according to the Federal Housing Finance Agency house price index) and where vacancy rates are still over 7% (excluding seasonal or vacation homes, according to the 2010 Census). Metro-level BLS data are released several weeks after the national data, so this indicator is for the previous month.
Job growth in clobbered cities grew 1.9% in October relative to three months ago (seasonally adjusted annualized rate, preliminary figures). The comparable national figure for October was 1.3%, so these clobbered cities had faster job growth than the U.S. overall. That’s a big change from the recession, when job growth in these metros was far worse than the national decline.
Among these clobbered cities, job growth was especially high in Riverside-San Bernardino, Phoenix, and Tampa, but other Florida metros – like Jacksonville and Orlando – lost jobs in the last quarter. And Detroit-area employment contracted by an annualized rate of almost 6%.
Links:
November 2011 BLS Employment Situation Summary
Additional jobs and unemployment data
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What Really Matters: October Jobs Report
The October jobs report was disappointing for the housing market: construction job growth was down 0.5% (annualized) versus last quarter, and unemployment among 25-34 year-olds rose to 9.8%. However, one bright spot was that job growth in “clobbered cities” was strong at 2.4% (annualized).
Today’s new numbers on jobs and unemployment in October show how the economy is doing overall. Economic recovery is essential for housing demand to pick up. We track three indicators in the monthly jobs report that matter most for housing to understand whether the recovery in housing demand is underway, approaching, or still far off. These include:
1) Construction job growth
2) Unemployment among 25-34 year-olds
3) Job growth in cities clobbered by the housing bust
Construction job growth
Why does this indicator matter for housing?
Construction jobs are at the heart of the virtuous or vicious cycle that connects jobs and housing. Housing demand leads to more jobs in construction and related industries, and more jobs means more income and housing demand. Construction job growth is a key indicator of whether this cycle is spiraling downward or spinning upward.
What happened this month?
In October, construction employment fell month-over-month and declined by 0.5% versus 3 months ago (seasonally adjusted annualized rate) and is essentially unchanged from October 2010. Total employment in all industries grew by 1.0% in the last three months. Construction employment growth has not quite caught up to the overall job growth rate, after contracting sharply in 2007-2009 and still lagging behind overall job growth in 2010. Construction jobs in October were 4.2% of total U.S. employment, down from 5.7% at the height of the housing boom below the normal range around 5%. Construction employment still has a lot of catching up to do to get back to its pre-boom share of overall jobs.
Unemployment among 25-34 year-olds
Why does this indicator matter for housing?
Between the ages of 25 and34 is prime time when many people form households with a spouse, partner, roommate, or by themselves, then start families and buy their first home. During and after the recession, household formation dropped for this age group, and more of them than ever are living with parents or other adults rather than renting or owning their own place. These folks will wait to form their own households and consider homeownership only when their job prospects improve. A key measure for housing demand and homeownership is the unemployment rate for this group and the share of this age group that is employed.
What happened this month?
In October, the unemployment rate for 25-34 year-olds rose to 9.8% from 9.7% in September and is at its highest level since December 2010. The unemployment rate for all adults, in contrast, fell from 9.1% to 9.0%. In October, 73.5% of 25-34 year-olds were employed (the rest are unemployed or not in the labor force because they’re in school, discouraged from looking, or not looking for other reasons), down from 73.7% in September and 73.9% in August. Before and during the boom, almost 80% of this age group was employed. The job market remains tough for this key age group: before the recession, unemployment for 25-34 year-olds followed the overall rate pretty much exactly, but has remained stubbornly above the all-adults rate even as the unemployment rate has drifted down slowly.
Job growth in “clobbered cities”
Why does this indicator matter for housing?
The housing bust had unequal effects nationally, with many local markets in Florida, the Southwest, inland California and Michigan facing some of the largest price declines and highest vacancy rates. Job growth anywhere will boost housing demand, but compared to other places, these clobbered cities are in more desperate need of motivated homebuyers to help their local housing markets recover. We define “clobbered cities” as metro areas where home prices dropped at least 30% during the bust (according to the Federal Housing Finance Agency house price index) and where vacancy rates are still over 7% (excluding seasonal or vacation homes, according to the 2010 Census). Metro-level BLS data are released several weeks after the national data, so this indicator is for the previous month.
What happened this month?
Job growth in clobbered cities grew 2.4% in September relative to three months ago (seasonally adjusted annualized rate). The comparable national figure for September was 0.9%, so these “clobbered cities” had faster job growth than the U.S. overall. That’s a big change from the recession, when job growth in these metros lagged the U.S.
Among these clobbered cities, job growth was especially high in Tucson, Phoenix, Riverside-San Bernardino and Tampa, but other Florida metros – like Jacksonville, Fort Lauderdale and Orlando – lost jobs in the last quarter.
Links:
–October 2011 BLS Employment Situation Summary
–Additional jobs and unemployment data
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What Really Mattered: Week of Oct 10-14, 2011
Finally, some good news on jobs, and the hard truth about getting low-risk, high returns from investing in a home.
More job openings, and more quitting
The housing market won’t improve until the job market does. Unemployment is creeping down only slowly. But this week had some good job news. Job openings – the number of unfilled positions being advertised – are almost 7% higher than a year ago, which is good news for job seekers. But employers are picky and could be having a hard time finding the right workers. Even though openings are up 7%, they’re advertising for jobs more than they’re hiring: the number of hires rose only 3% in the last year. On the other side of the human resources department, layoffs and firings are down 8% from a year ago, and back to the way things were before the recession.
But workers aren’t returning the loyalty: the number of workers voluntarily quitting is up 10% from a year ago, and up almost 20% from June 2009 when the recession officially ended. They say nobody likes a quitter, but the uptick in quitting might ironically be a sign that people feel confident that they can find a better job or have found one already. Most workers don’t voluntarily quit unless they feel like they have other options. With this glimmer of confidence in the job market, it’s only a matter of time before people start feeling better about the housing market as well.
Link:
—BLS August 2011 Job Openings and Labor Turnover (released 10/12/11):
Volatility: Can you get low-risk high returns?
Like everyone, I’ve been watching the ups and downs of the stock market. Stock prices ratcheted down in early August around the time of the debt ceiling debate in Congress, but volatility shot up and stock prices have been a roller coaster ever since. A good measure of how much the market is bouncing around — the VIX index — has been at its highest sustained level for the last two months since the darkest days of the financial crisis in the fall of 2008. For investors, volatility means risk: investors want to make lots of money with little or no risk. In other words, it’s better to have an investment that dependably returns 5% a year than one that has a 50/50 chance of returning 10% and returning nothing (unless you’re a thrill-seeking gambler).
You should think about home values the same way. Even though home prices aren’t volatile day to day the way the stock market can be, they are over a long period of time. In cities with volatile housing prices, you run the risk of losing all the money you put into your house – everything from your down payment to all the upgrades you made – if you can’t stay put long enough for the market to bounce back up again. Across the US, some markets are a lot bouncier than others. Home prices in Sacramento and Nashville, for instance, both increased around 3.3-3.4% a year on average for the last 25 years. But the similarity ends there. Over those 25 years, Sacramento prices swung big (up or down at least 10%) in 11 of those years, while Nashville prices never did. For the same average return over this period, buying a home in Nashville was a much less risky investment than buying a home in Sacramento. Why does this matter? Well, if you were CERTAIN in 1986 that you would stay put in a home until 2011, then Nashville and Sacramento were equally good bets. But people move all the time, and if you want to minimize the chance that your home will lose value, low volatility matters.
With housing as with any other investment, you want a high return with low risk. But long story short, you can’t have it all. Looking over 25 years, no local real estate market has offered a high return with low risk. Among larger metros, NONE of the top ten metros where prices increased most over time is also in the top ten in low volatility:
| # | Top Metros | Home Price Growth |
| 1 | Honolulu, HI | 5.7% |
| 2 | San Jose, CA | 5.5% |
| 3 | San Francisco, CA | 5.5% |
| 4 | Seattle, WA | 5.4% |
| 5 | Portland, OR-WA | 5.3% |
| 6 | Orange County, CA | 4.8% |
| 7 | Bethesda-Rockville-Frederick, MD | 4.8% |
| 8 | Tacoma, WA | 4.7% |
| 9 | Los Angeles, CA | 4.7% |
| 10 | Washington-Northern Virginia, DC-VA-MD-WV | 4.6% |
(Note: Home price growth is annualized growth rate in home prices, 1986-2011.)
| # | Top Metros | Low Volatility of Growth |
| 1 | Greenville, SC | 0.022 |
| 2 | Pittsburgh, PA | 0.024 |
| 3 | Jackson, MS | 0.025 |
| 4 | Wichita, KS | 0.025 |
| 5 | Omaha, NE-IA | 0.026 |
| 6 | Little Rock, AR | 0.026 |
| 7 | Louisville, KY-IN | 0.026 |
| 8 | Rochester, NY | 0.027 |
| 9 | Indianapolis, IN | 0.028 |
| 10 | Greensboro, NC | 0.028 |
(Note: Volatility is the standard deviation of annual home price changes, 1986-2011. All data from the Federal Housing Finance Agency home price index.)
Among the metros with the highest long-term price growth, Portland OR had the lowest volatility. But Madison WI would have given you still pretty high growth with less volatility – a good place for the risk-averse. But the bottom-right part of the graph – where average growth is high and volatility is low – is pretty empty.
Even though you can’t get high returns with low risk, you could get the worst of all worlds. Over the past 25 years, Las Vegas NV, Bakersfield CA and Phoenix AZ offered low overall price growth with very high volatility. Here’s hoping to a better next quarter-century in those places.
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What Really Mattered: Week of Oct 3-7, 2011
Some mixed news on construction trends, good news on the number of home loan delinquencies and how to price your home to sell
Housing data from the 2010 Census came out this week: yesterday’s blog post on where vacancies are high showed which markets are tightening and which are still weighed down by lots of vacant homes. Today, some mixed news on construction trends, good news on the number of home loan delinquencies and news you can use when you price your home to sell.
Construction Spending Favors Renters
What happens to the construction industry matters for builders and construction workers – especially with the unemployment rate for construction workers at 13.3% (which is several points higher than the overall unemployment rate). But construction trends also matter for all of us. Although construction employment and investment are up only minimally in the past year, new Census construction spending data show two key trends. First, construction spending on new multi-family homes – that’s apartments, condos, and so on – is 13% higher than a year ago. This is a reaction to rising rents and falling homeownership rates, and when this new construction becomes available, it will lower the cost of renting versus buying. But the second trend is the decline in government construction projects – especially roads and schools. Unlike the worst years of the housing crash, when the federal stimulus kept public construction projects going, state and local budget cuts are taking their toll. In the last year, public spending on roads is down 4.0% and on school construction is down 4.5%. Until this turns around, the infrastructure we rely on will suffer.
Links
—Bureau of Labor Statistics national employment and unemployment for September
—Census construction spending report for August
You Can’t Pay Your Mortgage If You Don’t Have a Job
A positive sign from this week is that delinquencies – homes with mortgages that are at least 30 days behind on their payments – are down almost 12% in August versus a year earlier, according to the LPS Mortgage Monitor. Meanwhile, foreclosures rose over the same period by 8%. What gives? Delinquencies and foreclosures are part of the same overall process. Some of those homes with late mortgage payments moved into the foreclosure stage, lowering the number of delinquencies and raising the number in foreclosure at the same time. Nationally, 12.2% of all loans – that’s one-eighth — are delinquent or in foreclosure. But this can be as high as 22.8% in Florida to just 4.5% in North Dakota. One reason for this discrepancy is that the relationship between the job market and the housing market is very strong. It’s a lot easier to pay your mortgage if you’ve got a job, and because a struggling housing market kills construction jobs. As you can see from the chart that we made below, all of the states where unemployment is low have below-average delinquencies and foreclosures. Meanwhile the states where homeowners struggle most to make their payments and keep their homes all have high or very high unemployment. The bottom line: the housing market won’t recover without a healthy job market.
Links
—LPS Mortgage Monitor September report
—Bureau of Labor Statistics, state unemployment rates for August
How to Price Your Home to Sell
Time for some news you can really use. The burning question on the minds of home sellers everywhere is price – how much should sell your home for? Should you set a high listing price to give yourself a better starting point for negotiations, or should you set a low listing price to draw in lots of prospective buyers and generate a ton of competing bids to push up the final offer? According to new unpublished academic research, you should price your home high, even though many real estate pros often recommend that you list low. This is because high list prices tend to lead to higher sales prices, even after taking into account details about the house, the neighborhood and time on the market. In fact, listing high is the right strategy – even in markets with lots of sales where you’d think listing low is the right call because it will spark a bidding war – because the high listing price will boosts the final sales price. This is even true in local markets with lots of foreclosures. Of course, if you need to sell quickly, a low listing price should get you out faster than a high listing price, but if you want the best price, even in today’s market, list high.
Links
—“Listing Behaviors and Housing Market Outcomes,” Grace Wong Bucchianeri and Julia Minson
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