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 jobs.

  • Job creation continued in December with 155,000 net new payroll jobs.  From one year ago, 1.8 million new jobs have been added.  From the cyclical low point nearly 3 years ago, there are now 4.8 million more jobs.  The unemployment rate held steady at 7.8 percent.
  • Still, we need to be mindful that 8 million jobs were cut during the Great Recession of few years ago, and hence we are still not out of the hole.  It has not been a good time to be a recent college graduate saddled with a large student loan debt.
  • Construction jobs are finally coming around with 30,000 additions in December.  Jobs in this sector had not matched up with other trends of higher housing starts.  So the lagging employment data is likely to show more construction job creations in the upcoming months.
  • Jobs in the profession business service sector have reestablished its prior peak and continue to expand.  That is very good news as demand will rise for commercial  office spaces.
  • Local governments continue to shed jobs in order to balance the budget.  State government jobs are no longer bleeding as the rising sales tax revenues are beginning help.  Federal government jobs are declining a bit, though the total number is substantially higher now versus several years ago.
  • The average worker wage rose to $19.92 per hour and may be at the initial stage of acceleration.  Up only 1.7 percent from one year ago, the latest monthly gain on an annualized pace was 3.7 percent.  If wages do accelerate then overall consumer prices will get pushed up.  In such a case, the Federal Reserve could be in a conundrum as to what to do.  Keep interest rate low and continue Quantitative Easing (printing money) to help lower unemployment rate or begin to raise interest rates in order to cool off inflation.
  • Irrespective of the Fed, the bond market will quickly factor in slightly higher inflation potential and charge modestly higher interest rates.  The rock-bottom low mortgage rates may already be over.  Though any rise will be not alarming, with the 30-year fixed rate mortgage rising to maybe 4.2 percent by the year-end from the current 3.5 percent rate.
  • The labor force participation rate of those with job or seeking work continues to remain at very low levels.  Many adults have dropped out of the labor force in recent years, either out of frustration in unable to find work, attending schools, took early retirement package or disturbingly to obtain disability benefits.  Had the labor force not fallen, the current unemployment rate would be above 10 percent.

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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