Economist's Commentary: March 7, 2008
Growing Job Losses
By Lawrence Yun, Chief Economist
Don't be fooled by the falling unemployment rate in today's data from the Bureau of Labor Statistics. The jobless rate fell a notch to 4.8% in February from 4.9% the month before. However, the total number of jobs also fell. By company's payroll measurements, which are most closely watched, there were 63,000 fewer jobs. By a survey of households (from simply asking do you have a job?), the total jobs fell by 255,000 during the month.
How is it possible that with fewer jobs, we have a declining unemployment rate? To be counted as unemployed, one has to be unemployed AND looking for a job. In the latest month, 450,000 gave up looking for a job, and hence, not counted as unemployed. Had they been looking for job, the unemployment rate would have risen to 5.1%.
NAR's short chart analysis can be found here.
By sectors, residential construction and related contractor work fell by 25,600 during the month and is now down by roughly 400,000 from two years ago. Commercial construction and related contractor jobs fell by 8,800 during the month, but is higher by 23,200 jobs from a year ago. Commercial real estate jobs have been holding up relatively well due to healthy commercial construction spending in 2007. I anticipate some decline in commercial real estate construction in 2008 due to the credit problems of obtaining loans to start on building construction.
Separately, not in the BLS report, REALTOR® membership showed a decline of 67,000 or by 5.3% over the past 12 months. The declines were largest in California, Florida, Arizona, Nevada, and Michigan - the exact states that are struggling with very soft home sales. Membership figures are still very elevated compared to the start of the decade by nearly 400,000.
With the economy essentially at a zero growth zone, do not anticipate any pick up in employment in the near term. Only by mid-summer can we realistically expect measurable rise in jobs.
A silver lining in the weak job data is that it has lowered the 10-year Treasury yield. That means mortgage rates are also likely to trend a bit lower. The last recession we had in 2001 was short and it also led to a fall in interest rates. That was just the beginning phase of the housing market boom. I do not anticipate a repeat. But the lower interest rates, however, are improving affordability and may induce some of the 95% with jobs to serious consider buying a home.
This is one in a series of commentaries by the Research staff of the National Association of REALTORS®.
