Job gains continued in July, thereby providing a solid foundation for home buying and commercial real estate leasing activity. Not all is alright, however. Part-time employment still remains above normal and wages are barely rising. Job gains in the construction industry remain tepid despite the need to build more homes.
Specifically, 215,000 net new jobs were added in July, which brings the total over the 12-months to 2.9 million. From a longer term perspective, 12 million net new jobs have been added from the low point five years ago after having shed 8 million jobs during the downturn.
Some sectors are experiencing a faster takeoff than others. Jobs in education and health care sectors have been on a steady increase while jobs in manufacturing are barely coming around. Also jobs in the professional business sector (which require office spaces) have been robustly rebounding while jobs in the construction industry have tepidly risen. Perhaps, due to rising inequality, the upper-tier people are outsourcing more of domestic works, as evidenced by a fast growing number of jobs in the “personal and laundry service”.
The unemployment rate has fallen to a multiyear low to 5.3 percent. But that partly reflects many people who have left the workforce and not looking for jobs. The opposite side of the coin is measuring the employment rate, which shows being stuck 59 percent and well below the pre-recession level of 63 percent. Moreover, part-time employment still remains elevated. Wages are rising by only 1.8 percent while rents are rising double that rate and home prices are rising by more than triple the rate.
As an aside, the discrepancy between the good figure on the unemployment rate and the bad figure the employment rate can partly be explained by a surge in disability benefits of recent years. Those who are on it are not counted as unemployed even though they do not have a job.
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.