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September Jobs Report Grim for Housing

Although residential construction jobs are outpacing overall job growth, construction job gains have been slow. Worse, the job market isn’t improving in the areas where it would most help housing demand: among young adults, and in clobbered metros.

Jed Kolko, Chief Economist
October 22, 2013

Each month, we look at three measures in the monthly jobs report to see whether housing is helping jobs and whether jobs are helping housing. Residential construction employment shows whether housing is helping jobs. Job growth for young adults (key age group for household formation) and job growth in “clobbered metros” (those hit hardest in the housing bust) show whether jobs are helping housing.

The September jobs report – released this morning – was grim for housing. Although residential construction jobs are outpacing overall job growth, the most recent quarters (Q2 and Q3) had slower construction job gains. Worse, the job market isn’t improving in the areas where it would most help housing demand: among young adults, and in clobbered metros.

  • Residential construction employment, including residential specialty trade contractors, was up 5.0% year-over-year — ahead of overall national employment growth of 1.7%. But construction job growth is slowing. After adding 29k jobs in 2012 Q4 and 40k jobs in 2013 Q1, residential construction added just 16k jobs in 2013 Q2 and 19k jobs in 2013 Q3. Furthermore, construction employment is growing much more slowly than construction activity: the number of units under construction grew 32% YoY in August. That’s because construction employment is higher than normal relative to the level of construction activity (explained here). There are now 3.3 employed residential construction workers for every unit under construction, as of August 2013, compared with 2.6 before the bubble, as the graph (either below or attached) shows:

Trulia_ConstructionJobs_HousingUnits_Chart

  • Young adults still aren’t working. Employment among 25-34 year-olds, the prime age group for housing demand, is still well below pre-bubble levels. Just 75.0% of them are employed – no change from one year ago, in September 2012. That’s closer to the low point during the recession (73-74%) than to the pre-bubble normal (78-80%). Without a job, young people are much more likely to live with their parents instead of becoming renters or home buyers.
  • Job growth in “clobbered metros” was 1.6% year-over-year (in August, the most recent metro jobs data) – a bit below national job growth of 1.7% for the same period. We define clobbered metros as the areas with the biggest price declines during the bust and the highest vacancy rates now: job growth in those markets is especially important for housing demand. Among clobbered metros, year-over-year job growth was especially strong in Tampa and Fort Lauderdale, but flat in Miami and negative in Detroit, where employment dropped 0.7% since last August.
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Best Job Markets for Raking It In, Avoiding Envy, or Sleeping Late

If you need a job now, move to Honolulu: that’s where unemployment is lowest. But look elsewhere if you want to maximize your paycheck, avoid extreme income inequality, live where women bring home more of the bacon, or just get an extra hour of shut-eye.

Jed Kolko, Chief Economist
August 28, 2013

Labor Day is as good a time as any to remember that looking for a home and looking for a job often go hand-in-hand. The top reason why people move to another state is for a new job or job transfer. In fact, 40% of cross-state moves in 2012 were for a new job, a job transfer, or to look for work, according to the Census. (But just 3% of within-county moves were for these employment-related reasons.) Of course, if you want to work in a highly clustered industry, you go where those jobs are: move to Los Angeles to make movies, Providence, RI to make costume jewelry, or Dalton, GA to make carpets. But if industry clusters, family, or other reasons don’t tie you to a particular city, there are lots of reasons to pick one job market over another.

Using the Bureau of Labor Statistics (BLS) and Census data (see note at end), we looked at how the 100 largest U.S. metros stack up on five job-market measures: lowest unemployment, highest earnings, least inequality, women’s share of earnings, and when people leave for work in the morning. We can’t promise you can have it all, but here are five strategies for picking the best job market for you.

Strategy #1: Where Unemployment is Lowest
If you need a job right now, go where the job market is tight. Low unemployment means relatively few people are actively looking for work. To put it in housing terms, low unemployment means a “seller’s market” – good for those looking to sell their labor (i.e. people), not so good for those looking to buy labor (i.e. companies and other employers).

As of July 2013, according to this morning’s BLS data release, unemployment is 4.2% in Honolulu, lowest among the 100 largest metros. Most of the lowest-unemployment markets are in the center of the country (Omaha, Oklahoma City, Minneapolis-St. Paul) or out West (Salt Lake City, Seattle). But California has some of the worst unemployment problems: four of the five metros with double-digit unemployment are in California, including Los Angeles, Riverside-San Bernardino, Bakersfield, and Fresno – where unemployment is 12.5%.

# U.S. Metro Unemployment Rate
1 Honolulu, HI

4.2%

2 Salt Lake City, UT

4.3%

3 Omaha, NE-IA

4.6%

4 Oklahoma City, OK

4.8%

5 Minneapolis-St. Paul, MN-WI

4.9%

6 Seattle, WA

5.2%

7 Tulsa, OK

5.2%

8 Bethesda-Rockville-Frederick, MD

5.5%

9 Austin, TX

5.6%

10 Birmingham, AL

5.6%

Strategy #2: Where Earnings are Highest
If all you cared about was raking it in, where would you go? Across the country, earnings vary hugely, even for people with similar education, age, and occupation. Using raw Census data and adjusting for these demographic and economic differences, we found that earnings are highest in San Jose, where the typical worker can expect to earn 34% more than the national average for someone with similar background, skills, and experiences. All of the top 10 metros for earnings are in the Bay Area or along the Northeast corridor of Boston, New York, and Washington.

# U.S. Metro Earnings Premium,
vs. National Average
1 San Jose, CA

34%

2 San Francisco, CA

29%

3 Fairfield County, CT

27%

4 Washington, DC-VA-MD-WV

26%

5 Oakland, CA

22%

6 Newark, NJ-PA

20%

7 New York, NY-NJ

20%

8 Bethesda-Rockville-Frederick, MD

19%

9 Edison-New Brunswick, NJ

19%

10 Boston, MA

19%

Of course, housing costs more in these markets, too. If you’re looking to spend as little of your income on housing as possible, look to where housing is cheap, not where earnings are high, such as Detroit, Houston, and Atlanta.

Strategy #3: Where the Gap between the Haves and Have-nots is Smallest
Looking to avoid the envy of your neighbors – or avoid envying them? Then move to where inequality isn’t quite as stark. To measure this, we looked at the ratio between earnings at the 90th percentile (that is, someone who is just at the bottom of the top 10%) and at the 10th percentile (someone who is just at the top of the bottom 10%). The smaller the ratio, the less unequal earnings are.

Springfield, MA, Toledo, OH, and Buffalo, NY, have least unequal earnings in the country: workers at the 90th percentile earn about 4 times as much as those at the 10th percentile. None of the 10 most equal metros are huge: they are all mid-size metros in all regions of the country.

# U.S. Metro 90/10 Ratio of Earnings
(lower = more equal)
1 Springfield, MA

3.9

2 Toledo, OH

4.0

3 Buffalo, NY

4.0

4 Grand Rapids, MI

4.1

5 Omaha, NE-IA

4.1

6 Greensboro, NC

4.1

7 Honolulu, HI

4.1

8 Akron, OH

4.1

9 Tacoma, WA

4.1

10 Virginia Beach-Norfolk, VA-NC

4.1

The most unequal metro – could you guess? – is New York, where the 90/10 ratio is 6.7, followed by Los Angeles and San Jose. Many of the most unequal metros also have the highest earnings premium (see above), so the inequality is more about the rich being especially rich rather than the poor being especially poor. However, three metros – Los Angeles, Houston, and Bakersfield, CA – are among the most unequal metros without particularly high wages overall.

Strategy #4: Where Women Bring Home the Bacon
Women are less likely to work than men, and working women earn less than men on average – even after taking education, occupation, and other background factors into account. As a result, women take home much less than half of all the money earned in the U.S.

So where should you go if you if you value equal pay between the genders? Women come closest to earning half in Sacramento, Springfield, MA, New Haven, CT, and Bethesda-Rockville-Frederick, MD, where they earn 41% of all workplace income. At the other extreme, just 31% of aggregate local earnings go to women in Salt Lake City, followed by 33% in San Jose and 34% in Houston.

# U.S. Metro % of Total Local Earnings Going to Women
1 Sacramento, CA

41%

2 Springfield, MA

41%

3 New Haven, CT

41%

4 Bethesda-Rockville-Frederick, MD

41%

5 North Port-Bradenton-Sarasota, FL

40%

6 Tampa-St. Petersburg, FL

40%

7 Providence, RI-MA

40%

8 Albuquerque, NM

40%

9 Baltimore, MD

40%

10 Little Rock, AR

40%

Strategy #5: Where You Can Sleep In
Maybe you don’t care about your own earnings or whether the have-nots are doing alright. If all you care about is getting a little extra sleep in the morning, some job markets will let you do that. It turns out that some cities run early, while others run late – by as much as an hour difference. With a little digging, we discovered that the Census asks people what time they leave for work.

The top sleep-in metros in the country are New York, San Francisco, and San Jose – where the typical worker in those markets leaves for work at 8:00 AM. At the other extreme, the typical worker in Houston, Phoenix, Honolulu, and several other metros leaves for work at 7:00 AM.

# U.S. Metro Median Time Leaving for Work
1 – Tie New York, NY-NJ

8:00 AM

1 – Tie San Francisco, CA

8:00 AM

1 – Tie San Jose, CA

8:00 AM

4 – Tie Detroit, MI

7:45 AM

4 – Tie Fort Lauderdale, FL

7:45 AM

4 – Tie Miami, FL

7:45 AM

4 – Tie Middlesex County, MA

7:45 AM

8 – Tie Long Island, NY

7:40 AM

8 – Tie Toledo, OH

7:40 AM

10 Buffalo, NY

7:35 AM

Note: the Census reports time leaving for work in 5-minute increments. For instance, “7:45 AM” was originally reported as “7:45 AM – 7:49 AM.”

Why are New Yorkers and San Franciscans the latest to leave their house in the morning? Not because they spend less time getting to work: New Yorkers have the longest commutes in the country, and San Francisco traffic is no picnic, either. In fact, there’s no clear pattern between when people leave for work and the length of the commute that awaits them.

Instead, time zones seem to be a factor: most of the later-leaving-home metros work on Eastern Time , while most of the earlier-leaving-home metros are in other time zones. That’s good for people who need to be in sync with the rest of the country: the later easterners start their day – or the earlier everyone else starts their day – there’s more overlap of working hours across the country. But that’s just a guess from someone who wakes up really early in California in order to catch economic data releases at 8:30 AM Eastern Time!

In short: local labor markets in the U.S. differ in expected and unexpected ways. What makes local job markets unlike each other isn’t only the industries that happen to cluster there. Don’t overlook the differences in earnings, equality, and how early the day starts when thinking about your next big job-related move.

Note: Data on reasons for moving are from the Census’s 2012 Current Population Survey March supplement. Unemployment data are for July 2013, from the Bureau of Labor Statistics. Data on earnings and time leaving for work are from the American Community Survey 2011 5-Year Public Use Microdata Sample (PUMS). Unemployment and time leaving for work are based on the metro where people live. Earnings data are based on the metro where people work.

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Sorry, Mom and Dad: The Kids Aren’t Moving Out Yet

Household formation is the most important measure of the housing recovery that hasn’t bounced back yet. The latest population data show that young adults are still living with their parents – even if they have jobs.

During the recession, fewer households – one or more people living under the same roof – were created than normal. Typically, 1.1 million new households are added each year in the U.S., mostly due to population growth. However, from the first quarter of 2008 to the first quarter of 2011, only 450,000 new households were created annually. Slower household growth means less demand for homes, so annual construction starts dropped during this period from a norm of 1.4 million to below 600,000. Most recently, only 521,000 households were created between the first quarter of 2012 and the first quarter of 2013.

A big part of the slowdown in household formation was due to young people living with parents or doubling up with roommates rather than setting up house on their own. Since most kids won’t live with their parents forever, these young adults represent “pent-up demand” for housing that the recovery should unleash. Problem is: the kids aren’t moving out yet.

More Than Two Million Missing Households
While other measures of the housing recovery are chugging along – like foreclosures, prices, sales, and construction – household formation is lagging. Thanks to years of below-normal household formation, the number of “missing households” has accumulated. Our early analysis of the 2013 Current Population Survey data (see note below) shows that there are still 2.4 million missing households, stubbornly close to the high of 2.6 million in 2010 and 2011. That’s equivalent to more than two years of normal household formation that have gone missing:

Year

# of “missing” households, millions

2008

0.9

2009

1.8

2010

2.6

2011

2.6

2012

2.3

2013

2.4

Note: estimate takes into account changes in the age distribution of the population. See note at end of post.

… continue reading

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Relative to Construction Activity, There Are Actually a Lot of Construction Jobs

Even though construction employment is rebounding more slowly than construction activity, there are more construction jobs per unit under construction than normal

In the monthly employment report for March, the Bureau of Labor Statistics (BLS) reported this morning that residential construction jobs increased 3.8% year-over-year. (We include both “residential building construction” and “residential specialty trade contractors” – here’s why.) That’s faster than the overall employment increase of 1.4% – reflecting that housing is now a critical part of the economic recovery.

A quick glance suggests that construction jobs aren’t keeping up with construction activity. Even though residential construction employment growth is outpacing overall employment growth, it’s puny relative to the rebound in construction activity, measured in housing units or dollars:

The Housing Recovery: Jobs, Housing Units, and Dollar Value

% Change
Y-o-Y

% Change since bottom

Residential construction jobs

3.8%

7.0%

New housing units under construction

28%

39%

Dollar value of residential construction
(new construction only)

34%

50%

Dollar value of residential construction
(new construction plus improvements)

18%

32%

Note: Jobs data through March 2013, from BLS; units under construction and dollar values through February 2013, from Census. Dollar values are adjusted for inflation and reflect the cost of labor, materials, contractor’s profit, and more. “Bottom” was January 2011 for jobs; Aug 2011 for units; May 2011 for dollar value (new only); and July 2011 for dollar value (new plus improvements). 

… continue reading

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Not Just Construction Jobs: Housing Recovery Boosting Jobs Economy-Wide

The housing recovery has added 125,000 residential construction jobs so far -- plus more than 184,000 jobs in other housing-related industries

This morning’s Bureau of Labor Statistics (BLS) jobs report showed that job growth in all housing-related sectors–not just construction–is outpacing job growth overall. Several recent key measures of the housing market show clear recovery:

More construction activity means more construction jobs, of course. But the housing recovery is also creating jobs outside of the construction sector, including the manufacturing firms that make lumber and concrete; stores that sell building materials and construction supplies; mortgage and other housing-related financial firms; and real estate agents, brokers, and other real-estate-related businesses. In all of these housing-related industries (see definitions at the end of this post), employment is growing faster than for the U.S. economy overall:

Year-over-year

Current versus peak

Current versus trough

Trough versus peak

U.S. economy overall

+1.5%

-2%

+4%

-6%

Residential construction

+3.1%

-39%

+6%

-42%

Manufacturing (housing-related)*

+1.7%

-31%

+4%

-34%

Wholesale and retail (housing-related)*

+2.0%

-13%

+5%

-17%

Mortgage and finance (housing-related)*

+10.8%

-43%

+12%

-49%

Real estate agents, brokers, and related activities*

+3.0%

-4%

+5%

-9%

All housing-related employment*

+2.7%

-28%

+5%

-31%

*Latest data published for housing-related jobs in manufacturing, wholesale/retail, mortgage/finance, and real estate agents/brokers/related activities—as well as for all housing-related employment—is for January, not February. Note: Peak and trough employment dates vary by sector. All figures are seasonally adjusted. Residential construction employment includes residential specialty trade contractors. Source: BLS.

Residential construction employment is up 3.1% — twice the overall employment growth rate of 1.5%. But other sectors are seeing job growth, too: employment among housing-related wholesalers and retailers–like building-supply stores–is up 2.0%, and job growth is up more than 10% in mortgage and housing-related finance jobs, too. Employment in all housing-related industries, including residential construction, is up 2.7% year-over-year, though still down 28% from its peak.

The trough-versus-peak, though, shows how much employment rose and fell with the housing market. While employment overall fell 6% from peak to trough, employment in housing-related sectors fell 31% peak-to-trough, with declines of over 40% in both residential construction and mortgage and other housing-related financial businesses. Even though employment in housing-related industries has had a strong recent bounce off the bottom, housing-related jobs are still far below their peak during the housing bubble.

Which NAICS codes did we count as “housing related”? Within construction, NAICS 2361 (residential building) and 238 part 1 (residential specialty trade contractors). Within manufacturing, 321 (wood products), 3273 (cement and concrete products), 3323 (architectural and structural metals), 33312 (construction machinery), and 33711 (wood kitchen cabinets and countertops). Within trade, 4233 (wholesale lumber and construction supplies), 4237 (wholesale hardware and plumbing), 42381 (wholesale construction equipment), and 444 (retail building material and garden supply stores). Within finance, 522292 (real estate credit) and 52231 (mortgage and nonmortgage loan brokers). Within real estate, 5312 (offices of real estate agents and brokers) and 5313 (activities related to real estate).

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