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Does the March Jobs Report Mean the Economy Isn’t Recovering After All?

Does the March Jobs Report Mean the Economy Isn’t Recovering After All?

Smoke on Housing: Jonathan SmokeJust when the nation’s economic recovery seemed to be chugging along, things hit a snag. According to the Bureau of Labor Statistics, only 126,000 new jobs were created in March. This was widely viewed as disappointing by market analysts—the average monthly job creation over the prior 12 months was 269,000.

A strong job market is vital to the health of housing, driving home price appreciation. That was reinforced by this week’s report from CoreLogic on home prices.

According to the report, six states—Colorado, New York, North Dakota, Oklahoma, Texas, and Wyoming—are seeing record new prices for homes.

With the exception of Wyoming, the states with record highs in home prices are also experiencing record highs in jobs. While Wyoming has not yet recovered its 2008 peak in jobs, unemployment for the state is now down to 4%.

Real, sustainable demand for housing depends on stable employment. Or put another way, strong and growing employment is a prerequisite for healthy gains in home sales and prices.

So should we be concerned with the March employment growth slowdown? I don’t believe so, or at least not yet.

Most economists are expecting stronger growth ahead in 2015. The consensus range for job creation in 2015 is between 2.5 million and 3 million. That would require March’s reading to be a blip in an otherwise continuing trend of monthly job creation north of 200,000.

Other employment data support the notion that indeed March was a blip. For example, this week’s initial claims for unemployment remained under 300,000 for the sixth straight week. That low trend is consistent with a strong and growing economy and labor market.

Job openings for February were reported above 5 million, a level we haven’t seen in 14 years. Meanwhile, new hires were up 5% over last year, and layoffs were down 5%. Remember that last year was an incredible year for job creation.

We do hope and expect to see stronger job creation in the months ahead. While we can say that nationally all jobs lost in the recession are now recovered, there is some slack in the labor market. Labor participation is lower than it was, and some people are settling for part-time employment when they would prefer a full-time job. If more people were working full time, that would drive wages and incomes higher and should also result in a stronger pace of household formation.

But ultimately what I’ve been describing here are national numbers. What’s relevant to consumers is the local market. Many parts of the country are now seeing very strong labor markets that favor the job seeker. It’s not just those six states with new highs in home prices that are doing well. Twenty-four states and the District of Columbia have record numbers of jobs now. Twenty-one states have an unemployment rate of 5% or less.

Strong local conditions favor the job seeker, support greater consumer confidence, and lead to strong economic growth. And that’s a perfect setting for robust home sales and healthy price appreciation in the months ahead.

As chief economist of realtor.com®, Jonathan Smoke leads its efforts to develop and translate real estate data and trends into accurate and relevant consumer and industry insights on housing.

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