The Employment Situation for May – A Milestone of Sorts

June 6, 2014

With the May numbers reported today payroll employment has officially surpassed the pre-recession peak of 138.365 million, by 98 thousand.

The Bureau of Labor Statistics (BLS) released the Employment Situation report for May. The establishment survey showed payroll employment expanded by 217,000. The April figure was revised down by 6,000 and the March figure was unchanged.

From the household survey, the unemployment rate held at 6.3%, but the addition of 192,000 to the labor force put some welcome upward pressure on the rate. That’s a good thing. Most analysts agree the unemployment rate overstates the health of the labor market because the labor force participation rate has declined significantly since the recession began and has yet to recover. The Federal Reserve abandoned the 6.5% threshold for the federal funds rate in recognition of this disconnect.

At this point a very positive (and much anticipated) labor market development would be for payrolls to continue expanding at a pace of at least 200,000 per month and the unemployment rate to hover at the current level (if not increase) as discouraged workers return to the labor force.

Passing the pre-recession peak is an accomplishment but with a depressed participation rate and still elevated levels of long term unemployment and under-employment there is still plenty of room for improvement.

blog emp 2014_05

 


$100,000 in Remodeling=Nine Tenths of a Full-Time Job

May 12, 2014

In addition to benefitting those who live in remodeled homes, remodeling also has the ability to stimulate the U.S. economy. The latest estimates released by NAHB show that spending $100,000 on remodeling generates about $48,000 in wages and salaries in the U.S., which translates to .89 of a job measured in full-time equivalents (enough work to keep one worker employed for a year).

Much like the impacts of new construction, a substantial share of the wages and salaries goes to construction laborers—those who actually install cabinets, replace windows, renovate bathrooms, etc. But the effects are broader. Every $100,000 in remodeling also supports one tenth of a full-time job in firms that manufacture building products, slightly more than that in firms that transport or store or sell those products, and about half that in businesses that supply design, accounting and other professional services to remodelers and their customers.Remod Jobs In addition to wages and jobs, it can also be worthwhile to look at profits generated for business proprietors. Many remodelers and especially their subcontractors are relatively small businesses and self-employed, so in the technical sense they don’t have jobs or earn wages, although that’s the way casual observers no doubt think of them. In the construction industry, the roughly $13,000 in profit that $100,000 in remodeling generates for mostly small businesses proprietors is more than 40 percent as large as the $30,000 generated in wages and salaries.

The wages and profits earned in the course of remodeling are subject to a variety of taxes and fees. The national impacts of $100,000 spent on remodeling also include $21,844 in federal taxes and $7,935 in fees and taxes imposed by state and local governments, for a total of $29,799 in revenue for governments at all levels.Remod TaxesThe government revenue includes a permit fee equal to 1.25% the cost of the remodeling project, the percentage based on conversations between NAHB’s Economics and Housing Policy staff and NAHB Remodelers. For other assumptions and more details about the methodology used to derive NAHB’s national impact of remodeling estimates, please consult the full report, published online as a Special Study in HousingEconomics.com.


The Employment Situation for April – Unemployment Rate 6.3% – It’s Not What You Think

May 4, 2014

The unemployment rate plunged to 6.3% in April from 6.7% in March. But curb your enthusiasm, it’s not what you think. First, the numbers.

The Bureau of Labor Statistics (BLS) released the Employment Situation report for April. The establishment survey showed payroll employment expanded by 288,000, and February and March were revised upward for a combined increase of 36,000.

The gains were broad based. Residential construction added 13,100 jobs, bringing the total number of jobs added since the beginning of 2012 when the housing recovery began in earnest above 200,000.

From the household survey, the unemployment rate dropped to 6.3% from 6.7% in March. But as has frequently been the case in this recovery, the decline was not due to an increase in the number of employed persons, but from a decline in the labor force. The number of employed persons actually declined by 73,000, but this loss was overwhelmed by a decline in the labor force of 806,000. If the labor force didn’t shrink and the 73,000 job losers were counted as unemployed, the unemployment rate would have risen to 6.8% instead of declining to 6.3%.

So the labor report is mixed, and context is important. The 288,000 addition to payrolls is definitely encouraging. Payrolls are now “only” 113,000 below their January 2008 peak and likely to surpass that mark in the next month or two, but that’s just making up six years of losses. And while the unemployment rate is at the lowest point since September 2008, the progress has been heavily dependent on labor market defections, like those in April, in combination with job gains.

This overstatement of labor market improvement in the current unemployment rate is why the Fed has recently abandoned its 6.5% threshold for considering raising short term interest rates. We’re there and the economic recovery is far from complete. On the other hand, the gain in payroll employment supports the Fed’s optimism regarding the economy going forward, and the decision to continue winding down its asset purchasing program, announced following its monetary policy setting meeting last week.

The Fed’s policy configuration, balancing accommodation to support a continuing but unfinished economic recovery, is a reflection of the complexities in Friday’s labor report: positive signals on the surface but a more complicated picture underneath.

blog emp 2014_04


Jobs Created in the U.S. When a Home is Built

May 2, 2014

In an article published the first day of this month, NAHB released new estimates of the impact that building single-family and multifamily homes has on the U.S. economy. The new estimates show that building an average single-family home generates 2.97 jobs, measured in full-time equivalents (enough work to keep one worker employed for a year).

A substantial share of this is employment for construction workers. But also included is employment in firms that manufacture building products, transport and sell products, and provide professional services to home builders and buyers (e.g., architects and real estate agents). A breakdown by industry is shown below, along with the wages and business profits generated in the process.Single-familyWages and profits are subject to a variety of taxes and fees. The national impacts of building an average single-family home include $74,354 in federal taxes and $36,603 in state and local fees and taxes, for a total of $110,957 in revenue for governments at all levels.

The article also shows equivalent estimates for building an average rental apartment, including 1.13 (full-time equivalent) jobs, with a breakdown by industry as shown below.MultifamilyEstimates of wages and jobs garner the most attention, but in industries like construction and real estate it can also be worthwhile to look at profits generated for business proprietors. Included in this category are many construction subcontractors and real estate brokers with relatively modest incomes, who are organized as independent contractors and therefore not technically counted as having jobs—although casual observers no doubt tend to think of them that way.

The impacts of building an average rental apartment include $28,375 in federal taxes and $14,008 in state and local fees and taxes, for a total of $42,383 in revenue for governments at all levels. For more details and assumptions used to produce the above estimates, consult the full article.

And keep in mind that these are national estimates, designed for use when the impacts on suppliers of goods and services across the country are of interest. Avoid trying to use national estimates to say something about impacts at the state or local level.  For that, keep referring to NAHB’s Local Economic Impact web page.


Construction Job Openings Cool at the Start of 2014

April 8, 2014

The number of open, unfilled construction sector jobs declined at the start of 2014, according to the BLS Job Openings and Labor Turnover Survey (JOLTS). While the February open rate is the fifth highest since the end of the recession, the count of open construction jobs fell during a period when unseasonably cold weather took a toll on numerous parts of the economy.

For the construction sector, monthly gross hiring declined slightly, falling on a seasonally adjusted basis from 281,000 to 273,000 from January to February. Over the same period, the hiring rate, as measured on a 3-month moving average basis, fell from 4.7% to 4.5%.

JOLTS_Feb 2014 data

Measured as a three-month moving average, the construction openings rate (the blue line above) has declined since December, inclusive of a significant downward revision for the preliminary January data. As of February 2014, the three-month moving average stood at 2%, a rate higher than any data reporting prior to October 2013 but lower than the December 2013 peak of 2.33%.

Two other changes in the construction sector are worth noting. First, the layoff rate for the sector (graphed above as a 12-month moving average) has continued to fall. Second, the sector hiring rate has fallen noticeably since the fall of 2013. The trend lines over the last two years – a falling hiring rate, an increasing opening rate, and a declining layoff rate – are consistent with some construction firms having trouble contracting with workers for specific projects. However, future employment reports will indicate whether recent hiring weakness is mostly due to weather effects or reflects new baselines for construction activity.

Monthly employment data for March 2014 (the employment count data from the BLS establishment survey are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.242 million, broken down as 650,000 builders and 1.592 million residential specialty trade contractors.

res construction employment

According to the BLS data, over the last year the home building sector has added 103,000 jobs. Since the point of peak decline of home building employment, when total job losses for the industry stood at 1.466 million, 257,500 positions have been added to the residential construction sector. As of March, over the last six months the home building and remodeling industry has added on average more than 10,000 jobs per month.

For the economy as a whole, the February JOLTS data indicate that the hiring rate was constant at 3.3% of total employment. The hiring rate has been in the 3.1% to 3.4% range since January 2011. The current overall job openings rate (2.9%) has been in the 2.7% to 2.9% range since the start of 2013.


Residential Construction Employment Up 9,100 in March

April 4, 2014

Solid job growth for home builders and remodelers was recorded in March, according to data from the Bureau of Labor Statistics (BLS). The residential construction industry added 9,100 jobs for the month on a seasonally adjusted basis, 3,100 working for builders and 6,000 residential specialty trade contractors.

res constr employment

 

Total industry employment now stands at 2.242 million, broken down as approximately 650,000 builders and 1.592 million residential contractors. For 2014, the residential building industry has been averaging 10,000 jobs created per month. Over the last year, 103,000 jobs were created, and the home building workforce has gained 257,500 jobs since the post-recession low point set in January 2011.

home building employment share

Over the last year and a half, the share of jobs being created by the sector has outpaced the share of industry employment. For example, in March 2014, industry employment represented 1.63% of total nonfarm jobs. However, residential building was responsible for 4.74% of total jobs created. Home building typically provides an outsized boost to economic growth and job creation as a recession ends. In the last year or two, home building has finally assumed this typical economic role.

Overall, the establishment survey from the BLS indicated that 192,000 jobs were created on a seasonally adjusted basis in March. This was slightly below expectations, but on net a positive indicator for the economy. Previous months reporting was also revised up by 37,000 jobs.

The March data is also consistent with the claim that unseasonably cold weather in much of the U.S. held back economic growth during the end of 2013 and the start of the new year.

The separate household survey reported that the unemployment rate held steady in March at 6.7%. In a positive sign for household formations and housing demand, the labor force participation rate increased 0.2 percentage points to 63.2%. The size of the labor force increased by 503,000 in March.

 


Construction Job Openings Rate at Second Highest Level Since 2007

March 11, 2014

The number of open, unfilled construction sector jobs increased 38% from 113,000 in January of 2013 to 156,000 in January of 2014, according to the BLS Job Openings and Labor Turnover Survey (JOLTS). The January count of open jobs in the sector is the second highest since May 2008.

While the recent increase in unfilled positions is consistent with the increase in construction sector activity, particularly for home building, the data continue to reflect only modest growth in total employment. The rise in the count of open positions thus matches reports of local labor shortages.

For the construction sector, monthly gross hiring increased somewhat, rising on a seasonally adjusted basis from 251,000 to 285,000 from December to January. Over the same period, the hiring rate, as measured on a 3-month moving average basis, fell from 5.1% to 4.7%. The pace of construction hiring slowed during 2013 compared to 2012 levels and this trend continued at the start of 2014.

cosntr labor market

Measured as a three-month moving average, the openings rate (the blue line above) has staged a noticeable rise since September 2012, with a brief pause during the middle of 2013. As of January 2014, the three-month moving average stood at 2.5%, a post-recession high. This recent increase in open positions occurred at the same time as the hiring rate began to fall.

Combined with a declining sector layoff rate (non-seasonally adjusted), charted as a 12-month moving average in the graph above, the uptick in open positions since 2012 suggests more, if modest, construction hiring in the months ahead – if firms can find workers with the right skills.

Monthly employment data for February 2014 (the employment count data from the BLS establishment survey are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.227 million, broken down as 648,000 builders and 1.579 million residential specialty trade contractors.

res constr employment

According to the BLS data, over the last year the home building sector has added 101,000 jobs. Since the point of peak decline of home building employment, when total job losses for the industry stood at 1.466 million, 243,000 positions have been added to the residential construction sector. As of February, over the last six months the home building and remodeling industry has added on average more than 8,000 jobs per month.

For the economy as a whole, the January JOLTS data indicate that the hiring rate was constant at 3.3% of total employment. The hiring rate has been in the 3.1% to 3.4% range since January 2011. The current overall job openings rate (2.8%) has been in the 2.7% to 2.9% range since the start of 2013.


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