Mar 9th 2012, 18:34 by R.A. | WASHINGTON
ONE more thought on this morning's job report. I noted this morning that:
The construction sector is still very weak; residential builders took on just 1,700 new workers in February. A better labour market overall, however, will raise housing demand and translate, eventually, into more of a recovery there.
One big factor holding back housing demand has been the decline in household formation through the recession and weak recovery. Last week, a piece in the print edition noted of the housing market:
A Goldman Sachs analysis reckons that growth in new households has been some 50% short of trend since the recession began, with over half of the shortfall coming from those aged 18-34. Goldman reckons the worst is over, and that the young should soon add to new housing demand.
As Jed Kolko of Trulia points out, this morning's report included good news on that front:
In February, the unemployment rate for 25-34 year-olds dropped to 8.7% from 9.0% in January and is at its lowest level in three years. The unemployment rate for all adults stayed steady at 8.3%. The recession hit this age group especially hard: their unemployment rate peaked at 10.6%, compared to 10.0% for all adults, but this gap is now closing. In February, 74.7% of 25-34 year-olds were employed (the rest were unemployed or not in the labor force because they're in school, discouraged from looking or not looking for other reasons), up from 73.9% a year ago, but still way below the normal level of almost 80%.
Here's a look at the numbers above:
The dive toward the end of the young-worker series is heartening. If that leads household formation to move back to trend, then housing demand will rise rapidly. That, in turn, should act as a nice amplifier of the current positive employment trend.
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More housekeeping...
Ohio's JANUARY employment numbers came out today.
Unemployment is down to 7.7% from a year ago 9.0%
Y/Y: 44,000 more jobs, 79,000 quit looking (a net of 35k who gave up?)
Total employment of 5.343 million, which is the highest since June of last year.
http://jfs.ohio.gov/releases/unemp/201202/doc.asp
Hopefully Ohioans got some of the 220k jobs in today's national February report.
Regards
i get a 43% increase in January student debt owed to the federal government over 2010s first quarter:
http://www.federalreserve.gov/Releases/g19/current/default.htm (under major types of credit)
even college grads with 6 figure incomes cant qualify for a mortgage because of student debt liabilities, and the BLS projects that 4 out of 5 of the new jobs in greatest demand this decade will be low paying, low skilled positions that dont even require a high school diploma, hardly the type that can qualify for a large mortgage"¦furthermore, there was a new report out last week from the center for housing policy that nearly one in four working households already spends more than 50 percent of its income on housing; renters have seen their rents rise 4% as their incomes declined, while the annual median income for working homeowners fell from $43,570 to $41,413 over two years, about a 5% decline"¦furthermore, there's been a trend in new hires to only open temporary or part-time positions so employers dont have to pay benefits...so until such time as more people are back to work full time at decent wages, and young people get out from under their debt load, the housing glut will persist...
Good eye!
I'll go Y/Y for January @ 29.8% increase in Federal Student loans only. Busted out month-by-month for a better comparison: http://www.federalreserve.gov/releases/g19/HIST/cc_hist_fg.html
What would be helpful would be the number of people with loans in order to calculate outstanding loan per person and the rise or fall of the Y/Y balance.
Remember, as students graduate they still owe and then you have to add the imcoming freshmen. If you compare Jan '11 with Jan '10, you'll see a 70.2% increase. That's after a 69.6% increase in Jan '10 vs. Jan '09.
Perhaps the surge to college during the recession is over?
Then again, these are federal loans, private loans aren't in the mix. ---
BTW... always nice to see the stock pitchmen try to spin a good employment report. (But that's their job, to try to create demand.)
Regard
FWIW...
The NY Fed says student loans outstanding rose to $867 Billion, end of Q4 2011 vs. the Fed's student loan number of $425.1 Billion. I'll assume the NY Fed's number is both federal and private student loans.
There's an Excel and Adobe version on the right side of the page to download. Under "RESOURCES" http://www.newyorkfed.org/newsevents/news/research/2012/an120227.html
Regards
The housing market recovery is dependent on several other factors, and may be delayed further despite the increase in emplyoment among 25-34 year olds.
1- The job market is still very mobile. With most advisors suggesting that unless individuals or couples will be in an area for more than x number of years they should be looking at rentals, new home sales may still stay low.
2- More importantly, let's not forget that the housing bubble was not due simply to overpricing (though that was part of it and house prices have still not come down to reality), but oversaturation. Building projects sit uncompleted or unfilled all over the country. Demand may be on the rise, but has it come close to being able to fill all the buildings and homes seeking buyers already built? Has it done so enough that there is sufficient justification for increased building of new homes and apartment/condo buildings?
The number of men and women 25-34 who are unemployed dropped by a S.A. 102,000 in February. Women 25-34 dropped 29,000 Men 25-24 dropped 71,000 http://stats.bls.gov/news.release/empsit.t10.htm
The number of men and women 25-34 who are working rose by a S.A. 116,000 in February. Rose by a non s.a of 195,000 http://stats.bls.gov/news.release/empsit.t09.htm
One has to give them some time to rebuild their finances before moving out.
Last week on Nightly Business Report the correspondant said the banks have 700,000 foreclosed homes on thier books. http://www.nbr.com/economy/fannie-mae-to-sell-off-2500-bank-owned-proper...
Regards
It might not be as quick as that. If you added a line for 22-25 to this chart, it would be significantly higher than 25-34, most of whom were well established before the recession hit. Also, what do the wages look like for these demographics?
True, the unemployment rate for 22-25 year olds will be much higher. But this group traditionally rents; they don't become home buyers until they move up into the next age bracket.
Being in the middle of that range, I can tell you that home ownership is a source of big anxiety for my contemporaries. Those that bought shortly before the crisis are deep underwater and won't be "upgrading" anytime this decade. Those that bought because of the $8k tax credit now feel trapped for years because of the clawback provision. Many of them feel their employment situation is tenuous, and wonder what they'd do if one one of them got laid off. Those that feel they have secure jobs are passing on potentially better opportunities because they don't feel they "can afford the risk with a mortgage."
The rest of us-those that continued renting or remained at home-very little incentive to buy a house until we believe that housing prices are about to start rising rapidly and the window of opportunity is closing. Instead, we can rent luxury condos (or homes) at cheap rates thanks to the overcapacity. The Fed is guaranteeing interest rates will be low for 2 more years. What's the rush? If you need us to drive up real estate prices and we don't need to buy until real estate prices are driven up, then it sucks to be you.
I've rented $800k+ (pre-crash) condos in two medianly expensive metros for less than $2k/mn with 30 days notice after 12 months. My credit rating remains sterling. My landlords are eager to keep me happy. Again: They are eager to keep me happy. I have no incentive to buy until the market flips back in favor of the landlord and their pricing power increases substantially. The gibberish about building equity is just that: gibberish. I have an IRA, a HSA, and non-retirement accounts that are diversified, agile, and leverage is a choice. I'm better off being free and clear to expatriate somewhere where my meager assets represent a small fortune in the event the Boomers in Washington decide to commit national euthanasia by defaulting our debt, failing to reform entitlements, driving off the golden geese with punitive taxes/dumb regulation, or any number of other stupidity bandied about in the chattering classes these days.
Take a good look around. People buy homes and settle down when they think that their best days are ahead of them. When they see viable paths to the American dream, and the ability to have roots. When they're living with anxiety about micro or macro circumstances, they are much more likely to hedge and favor agility. You guys are kind of confirming the consequent here: If young people are buying homes, they must be able to afford them.
The assumption seems to be that: Once young adults can afford homes again, they will start buying them.
It's a brave new world. Some of us get it. The truth is you guys pushed the "Washington Consensus," the Europe experiment, and trade liberalization and now global convergence is upon us with a vengeance. You pushed the hell out of the international structural reforms without tearing off the bandaid and doing the necessary domestic structural reforms to remain at the front of the pack long term. Now things are grim-not dire, but grim. Those of us that get it will do whatever we need to do to provide for ourselves and our families. That means we've even looked into expatriation. We're well aware you guys are calling the shots and that you might very well continue to sell us short to try to hang on to failed policies just long enough to last out your days on this Earth. Just don't expect us to be any less self-interested. Ayn Rand may have been wrong. It won't be the captains of industry that flee. It will be the highly educated, young adults with few to no dependents and high global earning power. There are a lot of us now. We have the most disposable income. We have the least holding us here. We're fully integrated with technology and have friends all over the world already. Distance means little to us. We have causes we care about all over the world. We're welcome all over the world. You're banking on us, the high income earners of the next generation, bailing out your entitlement programs and your healthcare costs and dealing with the social and political instability you're going to leave behind in your wake. We're going to be victims of the class warfare you're sowing.
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