Tag Archives: Unemployment

CR: Housing Starts and the Unemployment Rate

Housing Starts and the Unemployment Rate

by Bill McBride on 3/24/2013 

By request, here is an update to a graph that I’ve been posting for several years.  This shows single family housing starts (through February 2013) and the unemployment rate (inverted) also through February. Note: there are many other factors impacting unemployment, but housing is a key sector.

You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn’t hold.

Housing starts (blue) increased a little in 2009 with the homebuyer tax credit – and then declined again – but mostly starts moved sideways for two and a half years and only started increasing steadily near the end of 2011. This was one of the reasons the unemployment rate remained elevated.

Housing Starts and Unemployment RateClick on graph for larger image.

Usually near the end of a recession, residential investment (RI) picks up as the Fed lowers interest rates. This leads to job creation and also additional household formation – and that leads to even more demand for housing units – and more jobs, and more households – a virtuous cycle that usually helps the economy recover.  However this time, with the huge overhang of existing housing units, this key sector didn’t participate for an extended period.

The good news is single family starts have been increasing steadily for over a year, and that should mean more construction employment this year, and that the unemployment rate should decline further in 2013.

Read more at http://www.calculatedriskblog.com/2013/03/housing-starts-and-unemployment-rate.html#1S1MrI1OOd6JMEeC.99

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The Housing Bottom and the Unemployment Rate

The Housing Bottom and the Unemployment Rate

by Bill McBride on 10/15/2012 

Early this year when I wrote The Housing Bottom is Here and Housing: The Two Bottoms, I pointed out there are usually two bottoms for housing: the first for new home sales, housing starts and residential investment, and the second bottom is for house prices.

For the bottom in activity, I presented a graph of Single family housing starts, New Home Sales, and Residential Investment (RI) as a percent of GDP.

When I posted that graph, the bottom wasn’t obvious to everyone. Now it is, and here is another update to that graph (and a repeat of some analysis).

Starts, new home sales, residential InvestmentClick on graph for larger image.

The arrows point to some of the earlier peaks and troughs for these three measures.

The purpose of this graph is to show that these three indicators generally reach peaks and troughs together. Note that Residential Investment is quarterly and single-family starts and new home sales are monthly.

For the current housing bust, the bottom was spread over a few years from 2009 into 2011. This was a long flat bottom – something a number of us predicted given the overhang of existing vacant housing units.

Housing plays a key role for employment too. Here is an update to a graph I’ve been posting for a few years. This graph shows single family housing starts (through August) and the unemployment rate (inverted) also through September. Note: there are many other factors impacting unemployment, but housing is a key sector.

Housing Starts and Unemployment RateYou can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn’t hold.

Housing starts (blue) increased a little in 2009 with the homebuyer tax credit – and then declined again – but mostly starts moved sideways for two and a half years and only started increasing last year. This was one of the reasons the unemployment rate remained elevated.

Usually near the end of a recession, residential investment (RI) picks up as the Fed lowers interest rates. This leads to job creation and also additional household formation – and that leads to even more demand for housing units – and more jobs, and more households – a virtuous cycle that usually helps the economy recover.

However, following the recent recession with the huge overhang of existing vacant housing units, this key sector didn’t participate. This time the unemployment rate started falling before housing starts picked up.  Going forward I expect housing activity to increase and help push down the unemployment rate. Unfortunately I expect the housing recovery to be somewhat sluggish.

Read more at http://www.calculatedriskblog.com/2012/10/the-housing-bottom-and-unemployment-rate.html

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Skills Mismatch, Construction Workers, and the Labor Market – Liberty Street Economics

Skills Mismatch, Construction Workers, and the Labor Market – Liberty Street Economics.

Richard Crump and Ayşegül ŞahinRecessions and recoveries typically have been times of substantial reallocation in the economy and the labor market, and the current cycle does not appear to be an exception. The speed and smoothness of reallocation depend in part on the structure of the labor market, particularly the degree of mismatch between the characteristics of available workers and newly available jobs. Such mismatches could occur because of differences in skills between workers and jobs (skills mismatch) or because of differences in the location of the available jobs and available workers (geographic mismatch). In this post, we focus on skills mismatch to assess the extent to which the slow pace of the labor market recovery from the Great Recession can be attributed to such problems. If skills mismatch is much more severe than usual, we would expect the unemployment rate to remain higher for longer and the workers subject to such mismatch to have worse labor market outcomes.
    We concentrate particularly on construction workers, who many have thought are prone to a high degree of skills mismatch because of the housing boom and bust. Contrary to this view, we find that (1) general measures of mismatch, after rising sharply in the recession, are now near their pre-recession level as they continue to display a pronounced cyclical pattern; and (2) construction workers are not experiencing relatively worse labor market outcomes.Skills Mismatch in the U.S. Economy
We measure skills mismatch using the index developed in Şahin, Song, Topa, and Violante (2011). This index is based upon the number of vacancies (that is, job openings, a measure of labor demand) and the number of unemployed workers (a measure of labor supply). By comparing these variables across the economy (for example, across industries), the authors create a measure of overall mismatch in the labor market. An increasing imbalance between the shares of vacancies and unemployed workers across industries is a sign of greater mismatch.Based on this mismatch index, we conclude the following: First, the index displays considerable cyclicality, increasing notably in recessions. Second, the index has fallen appreciably during this recovery and is now near its pre-recession level. This pattern suggests that although mismatch rose considerably during the Great Recession, that rise proved temporary.

Mismatch-Index

The Plight of Construction Workers
Because of the role of the housing boom and bust in the Great Recession and the continued depressed state of the housing market, concerns have arisen about the labor market prospects of construction workers. We investigate this issue through measures of labor supply and demand in the industry. Comparing the unemployment rate for those previously employed in construction with the overall unemployment rate, we find that the improvement in the unemployment rate for construction workers has been notable relative to the overall unemployment rate. That said, the rate for these workers remains at a high level of approximately 16 percent (note the differing scales for the two variables in the chart below).

Unemployment-Rate

The current construction unemployment rate is approximately double its level over 2001-07. There are about 1.35 million unemployed construction workers—about 10 percent of total unemployed workers. Nevertheless, as seen in the next chart, the construction share of unemployed workers has dropped substantially from its highs in the recession and is only slightly above its average of about 9.5 percent over 2001-07, even though the unemployment rate remains elevated.

NEW-Construction-as-a-Share

As we have stressed earlier in this series, focusing only on unemployment is not necessarily the best measure of the health of the labor market. For example, former construction workers may exit unemployment by leaving the labor force rather than finding jobs. To obtain a better sense of labor market conditions for construction workers, we first look at their job finding rate. We need to be careful in interpreting this rate for a particular occupation because unemployed workers may change occupations. However, as seen in the chart below (based on a “Chart of the Day” from the San Francisco Fed), a large majority of the unemployed construction workers who are re-employed take new jobs in construction. Moreover, the housing boom and bust appears to have had only minor effects on this pattern.

Transition-Probabilities

With this observation in mind, we compare the job finding rate for construction workers with the overall job finding rate and find that the rates have displayed similar patterns in recent years (see chart below). (We have also looked at a number of other substitute and skilled occupations and arrived at similar conclusions.) In fact, the job finding rate in construction actually has improved more since mid-2010 than has the overall rate.

Unemployment-to-Employment

Even though construction workers do not appear to be faring worse than other workers in finding new jobs, they may still be leaving the labor force more than other unemployed workers in this cycle. However, as the next chart shows, the flow of construction workers from unemployment to nonparticipation has remained below that of the overall labor force in recent years. In addition, even though this flow for construction has shown a bit of an upward trend recently, its rise is clearly less pronounced than that for the total labor market.

Unemployment-to-Nonpart

To secure employment, construction workers may have had to make greater concessions than other workers. We address this issue using the Displaced Worker Survey from the Bureau of Labor Statistics, which summarizes the experiences of workers who were displaced in 2007-09 from jobs they had held for at least three years. The survey suggests that construction workers have not made more concessions than other workers. The shares of displaced construction workers who have been re-employed by becoming self-employed or by taking part-time jobs are similar to those of overall displaced workers. Re-employed construction workers also have a similar distribution of current wages relative to the wages they earned in their previous job as overall displaced workers. Note that this survey was taken in January 2010, before the upward rise in the job finding rate of construction workers presented earlier.

Employment-Status-Table

Earnings-Table

Disclaimer
The views expressed in this blog are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

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Construction Employment Continues to Grow in 2012

Construction Employment Continues to Grow in 2012

by Robert Dietz

The year 2011 was the first year since 2006 for which the overall construction sector added net jobs. And January data from the Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics indicate that the construction sector continues to expand.

For the economy as whole, hiring continues at rates that add net jobs to the economy. The hiring rate in January was 3.1%, while the job openings rate (red line below) continued along its post-Great Recession upward trend.  It now stands at 2.5%. The growing number of open positions bodes well for job creation in 2012, which in turn should help support demand for both owner-occupied and rental housing.

For the construction sector as a whole, layoffs rose late in 2011; however this is not unexpected. Unlike other numbers reported in this post, the JOLTS layoff data for the construction sector are not seasonally adjusted. Typically, layoffs for the construction sector tend to rise at the end of the calendar year. The good news is that this seasonal increase in layoffs appears to have been smaller compared to the last three years. However, the hiring rate slowed somewhat for the construction sector in January, coming in at a 5.5% rate.

Nonetheless, total hiring in January for construction was slightly higher than total job separations, including layoffs. Net job creation was reported at 17,000. This is a good start for the year, given that total net hiring for construction in 2011 came in at 67,000 positions.

These construction job developments are positive but small indicators of improvement. The net job loss for home building (builders and residential specialty trade contractors) during the Great Recession can be found using the BLS Current Employment Statistics. Total employment for home building peaked at 3.45 million jobs in April 2006 (1.02 million builders and 2.43 million in the trades).

At the lowest level of home building employment,December 2010, total jobs in the sector had fallen to 1.99 million, a loss of 1.46 million jobs. And this accounting is just the direct employment effects, which excludes the spillover losses that occurred in businesses associated with home building and remodeling.

Because of recent, albeit small, improvements, total employment in home building is now 2.03 million (573,000 in home building and 1.46 million in associated trades).

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Construction Employment, Duration of Unemployment, Unemployment by Education and Diffusion Indexes

Construction Employment, Duration of Unemployment, Unemployment by Education and Diffusion Indexes

by CalculatedRisk on 3/10/2012  

A few more graphs based on the February employment report. The first graph below shows the number of total construction payroll jobs in the U.S. including both residential and non-residential since 1969.

Construction employment decreased by 13 thousand jobs in February, but construction employment has increased 98 thousand since bottoming in January 2011. Last year was the first year with an increase in construction employment since 2006, and the first with an increase in residential construction employment since 2005.

Unfortunately this graph is a combination of both residential and non-residential construction employment. The BLS only started breaking out residential construction employment fairly recently (residential specialty trade contractors in 2001).

Usually residential investment (and residential construction) leads the economy out of recession, and non-residential construction usually lags the economy. Because this graph is a blend, it masks the usual pickup in residential construction following previous recessions. Of course residential construction didn’t lead the economy this time because of the large excess supply of vacant homes.

Construction EmploymentClick on graph for larger image.

Construction employment is generally increasing and construction will add to both GDP and employment growth in 2012.

As I’ve noted for years, there are usually two bottoms for housing following a bubble: 1) when housing starts, new home sales, and residential construction bottoms, and 2) when house prices bottom. It is pretty clear that the bottom is in for housing starts, new home sales and construction employment, and I think we are very close on prices.

Duration of Unemployment
Unemployment DurationThis graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more.

All categories are moving down (the less than 5 week category is back to normal levels). The other categories are still high.

The the long term unemployed declined to 3.5% of the labor force – this is still very high, but the lowest since August 2009.

Unemployment by Education
Unemployment by Level of EducationThis graph shows the unemployment rate by four levels of education (all groups are 25 years and older).

Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate – and it appears all four groups are generally trending down.

Note: This says nothing about the quality of jobs – as an example, a college graduate working at minimum wage would be considered “employed”.

Diffusion Indexes
Employment Diffusion IndexThis is a little more technical. The BLS diffusion index for total private employment was at 57.9 in February and for manufacturing, the diffusion index was at 56.8. The index was revised up sharply for January – to the highest level since the ’90s.

Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. From theBLS:

Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.

It appears job growth is now fairly widespread across industries.

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Mortgage Bankers: Delinquencies and Foreclosures Continue to Fall, but a Few Problems Persist

by Brian Lego — Eye on Housing

The Mortgage Bankers Association’s National Delinquency Survey showed the delinquency rate on first-lien residential mortgages dropped 41 basis points to 7.58% during the fourth quarter of 2011 (down from 7.99%). While the foreclosure inventory remained elevated from a historical perspective to close out the calendar year, it still registered a modest decline between the third and fourth quarters of 2011, falling 5 basis points to 4.38%. The share of loans entering the foreclosure process during the final three months of the year slipped to 0.99%–marking only the second time in the past four years the foreclosure starts rate fell below 1%.

Jay Brinkmann, MBA’s Chief Economist, discussed some of the observed improvements in mortgage loan performance:

“Mortgage performance continued to improve in the fourth quarter, reflecting the improvement we saw in the job market and broader economy. The total delinquency rate and foreclosure starts rate decreased and are back down to levels from three years ago. A major reason is that the loans that are seriously delinquent are predominantly made up of loans originated prior to 2008 and this pool is steadily growing smaller as a percent of total loans outstanding. In addition, employment is the key driver of mortgage performance and the mortgage delinquency rate is actually falling faster than the unemployment rate is declining,”

A promising piece of data in last quarter’s results was the broad-based geographic improvement in mortgage loan performance. The share of seriously delinquent loans remained unchanged or fell in 25 states, including the hardest-hit areas of California, Florida, Nevada and Arizona. While this represents an improvement, the foreclosure crisis still very much remains concentrated geographically as five states—Florida, California, Illinois, New York and New Jersey—account for more than half of all foreclosures yet only represent less than a third of all serviced loans. By itself, Florida accounts for nearly 25% of the nation’s total foreclosure inventory.

The legal process has had a palpable effect on the level and trajectory of foreclosure activity across states. Indeed, of the top 15 states in terms of the current share of first lien mortgages in foreclosure, 14 use the judicial process to handle foreclosure cases. Furthermore, foreclosure inventory rates in judicial states are roughly four percentage points higher and have seen rates trend appreciably higher while non-judicial process states have experienced modest declines in foreclosure rates during the past two years.

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Housing Starts and the Unemployment Rate

Housing Starts and the Unemployment Rate

by CalculatedRisk on 2/17/2012  

An update by request: The following graph shows single family housing starts (through January) and the unemployment rate (inverted) also through January. Note: there are many other factors impacting unemployment, but housing is a key sector.

You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn’t hold.

Housing starts (blue) increased a little in 2009 with the home buyer tax credit – and then declined again – but mostly starts moved sideways for two and a half years and only started increasing recently. This was one of the reasons the unemployment rate has remained elevated.

Housing Starts and Unemployment RateClick on graph for larger image.

Usually near the end of a recession, residential investment (RI) picks up as the Fed lowers interest rates. This leads to job creation and also additional household formation – and that leads to even more demand for housing units – and more jobs, and more households – a virtuous cycle that usually helps the economy recover.

However this time, with the huge overhang of existing housing units, this key sector hasn’t been participating. The good news is single family starts should increase modestly in 2012, and construction employment should also increase.

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