Homebuilding’s Big Helper: Employment
With staffing levels that are, in many cases, ridiculously low, corporations have been able to maintain their profit margins with help from productivity gains. The inclination is, naturally, to keep “doing more with less,” although at some point competitive pressures and gradually improving economic conditions compel companies to become a little less focused on squeezing blood out of a stone.
For the sake of the housing market, let’s hope hiring accelerates. The recovery, as is often noted, is sputtering but still inching forward – and if it continues to improve, it will drag housing along with it. As the National Association of Home Builders’ chief economist, David Crowe, pointed out last week during NAHB’s Construction Forecast Webinar, “the bottom line is that there has been some improvement, with the rest of the economy pulling us out of recession rather than the housing market pulling the rest of the economy, which is the more typical sequence of events following recession.”
With almost 6 million people who have been out of work at least six months and 4 million who have been unemployed for more than a year, “the rest of the economy” that is expected to do the pulling for housing really is riding on the back of employment. Few indicators are more closely watched or more closely tied to household formations. If employment continues to climb, essentials such as housing will follow, especially now that, as the webinar participants noted, home prices “nationally are just about back to where they should be relative to income following explosive growth during the boom.”
Will job creation continue to track up?
The employment figures for April, announced by the Labor Department on Friday, showed the unemployment rate inching up to 9.0% from 8.8% in the agency’s survey of households, but the addition of 244,000 jobs, a 10.5% increase over the 221,000 jobs added in March, beat most analysts’ expectations. Employers have added, on average, 192,000 jobs a month this year, an improvement of 146% (so far) over the 78,000 monthly average last year.
Unemployment and employment statistics have been volatile for so long, it’s easy to feel hopeful but difficult to feel confident that the employment picture will, for the most part, continue to improve.
Unless you’re Vice President Joe Biden.
Speaking at a political fundraiser in Pittsburgh, Pennsylvania, on Friday, Biden predicted that the economy would create 100,000 to 200,000 jobs next month, and that soon thereafter jobs would be added at a rate of 250,000 to 500,000 per month. The prediction likely raised a few eyebrows among those in attendance, but Biden is a veteran eyebrow raiser and, according to a press pool report, acknowledged that he “got in trouble” for a job growth prediction in March.
“Even some in the White House said, ‘Hey, don’t get ahead of yourself,’” he recalled. “Well I’m here to tell you some time in the next couple of months we’re going to be creating between 250,000 jobs a month and 500,000 jobs a month.”
Sure would be nice for everyone, homebuilders included, if he turns out to be right.
This map shows predicted recovery rates for housing production in each state at the end of 2012. The top 20% will be above 82% of normal production, while the bottom 20% will be below 55% of normal production.