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 the latest data on the unemployment rate.
- The unemployment rate plunged in December to the lowest level in five years. The latest 6.7 percent jobless rate is almost back to normal. The mystery, however, is that very few jobs were created over the month.
- The all-important payroll jobs grew by only 74,000 in December. That is much less than the 200,000 or so that are needed each month to move the job market into a noticeably improved state.
- The principal reason for the deep fall in the unemployment rate is due to nearly ½ million people leaving the labor force in the past three months. When people are not looking for work, even though they are without a job, they are no longer officially classified as being unemployed. The opposite side of the coin – the employment rate, measuring what proportion of the adult population has a job – remains stuck at recession levels. Only 58.6 percent of adults have jobs compared to 63 percent prior to the Great Recession. In this sense the job market has only been treading water over the past five years with no meaningful progress.
- As to job creation over a longer period, from the low point in 2010 a total of 7.5 million net new jobs have been added to the economy. Note that 8 million jobs were lost during the Great Recession, so we have not yet fully recovered all the jobs that were shed several years ago. Moreover, every year there are fresh high-school and college graduates looking for jobs.
- Improvements in the housing sector led to about 100,000 net new jobs over the past 12 months in residential construction and for general contractors. In the more sluggish commercial real estate arena, only 20,000 jobs have been added.
- In other sectors, rental leasing jobs have increased solidly by 46,000. The low apartment vacancy rates naturally require more workers for property management. Federal government jobs have fallen by 80,000. Given that the defense spending has been taking the biggest blow over the past year, many military and defense related jobs may have been shed. Finally, Hollywood is hemorrhaging as there are 23,000 fewer jobs (a big 6 percent plunge) in the motion pictures and sound recording industries. Smiles at Oscars could be of the sad kind.
- Despite the mixed news on employment, the direction is clearly for the better. The net 2.2 million new jobs and the likely 2 million or so in the current year will provide support for home sales and increased leasing of commercial buildings.