Solid job gains of 209,000 in July, bringing the 12-month tally to 2.6 million. Job gains will be critical for home sales and commercial leasing activity in what will inevitably be a rising interest rate environment ahead.
Construction related jobs rose by 22,000 over the month and by 211,000 in the past year. Though positive, the construction jobs are not rising as fast as housing starts, which imply there is a labor shortage in this sector. Homebuilders and general contractors will need to pay higher wages to entice people to work in homebuilding.
A typical worker’s wage rose by 2.0 percent over the past 12-months. Since consumer price inflation is running roughly the same (2.1 percent in July), there is no net gain in purchasing power for consumers. Consumer’s housing costs are rising faster: national rents at 3-to-4 percent and national home prices at 4-to-9 percent depending upon data source. Local market data has larger variations.
The unemployment rate rose a notch to 6.2 percent. The increase is due to more people re-entering the labor force. The trend of more people searching for work is a good development even if they cannot find a job right away. A healthy person should not be sitting on a couch at home all day.
The employment rate – how many of the adult population have jobs – stood at 59 percent. Before the financial market crisis in 2008, the employment rate had been 62 to 64 percent. So there is still a plenty of room for improvement in America’s employment situation.
The latest data is good all-around and we hope the trend continues. But one sad commentary is worth noting. Aside from construction, there is an acute labor shortage in truck driving. A college degree is not required and annual pay can be $80,000 to $100,000 after putting-in overtime hours. Yet, the trucking industry is having difficult time finding drivers. The reason: drugs. Irrespective of how one feels about drug usage, from the libertarian view of free choice as long as it harms no one to some claims of health benefits, the trucking industry is focused on only one thing: safety! And many applicants, unfortunately, cannot pass the drug test.
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.