Hello and happy Friday to all!
Jed Kolko, the chief economist for Trulia, was recently interviewed by Lauren Lyster for Yahoo! Finance. Kolko discussed reasons why the housing market recovery has not helped the job market. According to Kolko, “The economy helps the housing market. The housing market should help the job market, but right now neither one of those is working as it should.”
Kolko cited the September jobs report and stated that this past quarter, employment in construction had risen at half the rate that it did earlier in the year (19,000 jobs versus 40,000 in the beginning of 2013). As a result, Kolko said that the housing market is not giving as much back to the economy due to there not being as many new construction jobs.
Currently, according to Kolko, the unemployment rate for construction workers is above the rate of many other jobs. During the recession, construction took a huge hit, and unfortunately, we are still seeing the effects of that. Despite the housing market turning around with sales back to more normal levels and prices rebounding, construction is still below normal levels–40% below. During the height of the bubble, there was much overbuilding going on, and now there are many homes that are vacant.
Kolko went on to discuss an important reason as to why there aren’t a lot of new construction jobs and that has to do with young people: the 25-34 year old crowd. He stated that during the recession, “young people were hit hard.” The unemployment rate for this group went up 10%, and right now, just 75% of young people (25-34) are employed.
How is this related to the housing market? Kolko explained that people ages 25-34 are often in the position to become first-time homebuyers. Because so many are either out of work or not earning enough, a large number of this population is moving back home. Kolko stated that what we are seeing is a delay in when this age group would typically enter the housing market. Young people who don’t have jobs are not buying houses.
Let’s hope the relationship between the housing market and job market improves soon.