In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses July’s employment figures.
- Decent job creation of 163,000 in July, but the unemployment rate inched higher to 8.3% because more people were officially listed as unemployed.
- From the low point of a few years ago, 4 million net new jobs have been added to the economy. That is widening the pool of future homebuyers and renters. However, 4 million jobs are only half of the 8 million job losses that occurred in the Great Recession of 2008-2009. Also, the total number of jobs today is essentially the same as 10 years ago, though the population has grown by roughly 30 million over this time span. The economy needs to add 250,000 net new jobs each month for the next 10 years to bring the unemployment rate down to the more normal 5% figure.
- Something looks amiss in regards to construction job figures. In July 6,000 residential construction jobs were added to the economy, but the total jobs in this sector have not meaningfully moved up from the low point even though home sales and new home construction activity has been rising.
- Jobs in the Professional Business Service sector have been making a good comeback as more accountants, lawyers, architects and management consultants are hired. These professions require office space, so the commercial real estate demand looks to be increasing.
- The number of long-term unemployed slid down a bit but continues to remain very high. A total of 5.2 million Americans have yet to find a job after losing one more than 6 months ago. In normal times, the figure is about 1 million and during normal recessions the figure is about 2 million. All the past skill sets will become outdated the longer the person remains unemployed.
- One trend that requires a reversal for the long-term economic health of the country is the labor force. A person who is employed or wants to work is in the labor force. But a person is not in the labor force if he or she is not searching for work. The reasons could vary from becoming a full-time graduate student, taking early retirement, or seeking disability benefits. Investment in one’s education is of course all fine and good if it leads to a more productive society. But if a good portion of the adult-age population remains out of the labor force for a prolonged period, it could steadily chip away at U.S. economic muscle in relation to other economically emerging countries, such as China and Brazil.
- Today’s job report was good, but certainly not great. What matters for real estate is not the official unemployment rate but jobs. And jobs are steadily coming around, so housing demand and commercial real estate demand will be rising. Still, it is worth repeating: the economy needs to add 250,000 net new jobs every single month for the next 10 years to bring the unemployment rate down to the more normal 5% figure.