Economist's Commentary: June 2, 2008

Local Job Market Performance

By Lawrence Yun, Chief Economist

Just as with the housing market, there are large variations related to local job market conditions (PDF 316.51K). The two are related. First, the job losses in the construction and housing-related sectors have been the principal driver of current weakening job conditions. The surprise, however, is that the weak job market areas are the ones seeing a notable improvement in home sales.

The job market has been souring overall nationally. Due to several months of net job cuts, the total payroll employment is up by only a half million over the past 12 months rather than the 2 million under normal, better conditions. This Friday's report on the latest national job figures will provide us with a better clue on the direction of the economy.

Despite this broad national job trend, some local areas have fared much better. Interestingly the top two states in terms of the job growth rate were in Texas and Wyoming, which expanded by 2.6 percent and 3.0 percent respectively, which is about ten times faster than the national job growth rate. I would attribute this to coincidence rather than any political steering by the current administration. On a raw count, jobs grew by 270,000 in Texas and by 8,400 in Wyoming over the past 12 months.

On the other side of the coin, Michigan continues to hemorrhage with 72,700 fewer jobs in just the past 12 months after having lost jobs for the seven straight years. Florida, Rhode Island and Wisconsin were the other states with job losses by at least 0.5 percentage points.

The following is the list of best and worst performing job markets at the metro level.

Traditionally, home sales are driven by jobs. Currently, however, the bottom job market performing areas are the ones seeing notable improvements in home sales (or on the verge of improving based on pending home sales). Meanwhile, home sales have been generally falling in the stronger job performing areas. The strange quirk in the current jobs to home sales relationship reason is due to home prices.

Home prices are strong in markets with solid job growth and that have cut into housing affordability, particularly in light of the mortgage credit crunch. The weak job market areas have witnessed fast speedy home price reductions. There is more desperation among home sellers in these areas. The bargain prices have in turn induced those with jobs, who still make up well over 90 percent of the local labor force even in weak markets, to pick up homes on the cheap. One REALTOR described this essentially as "stealing" homes.

The strange quirk of rising home sales in distressed areas is also hinting at a very late stage of the current national housing recession. It also says, with credit conditions improving of late, that we are on the verge of an overall housing market recovery.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

Comments? Questions? E-mail NAR Research.

NAR members, learn how you can add this commentary to your Web site, blog, or newsletter. Read more >