Economists' Outlook

Housing stats and analysis from NAR's research experts.
  • Data from the Bureau of Labor Statistics (BLS) showed that 288,000 jobs were added to the economy in June, marking the fifth consecutive month of net job growth above 200,000. Upward revisions to April and May data added 29,000 jobs and pushed the 12 month average of jobs added over 200,000 in both May and June. Additionally, the unemployment rate dropped notably from 6.3 to 6.1 percent—its lowest level since September 2008.
  • In June, job growth occurred in both the government (+26,000) and private sectors (+262,000). The biggest job gains were in service industries such as the professional and business services (+67,000), retail trade (+40,200), leisure and hospitality (+39,000) and education and health services (+38,000). Goods-producing industries such as manufacturing, construction, and mining added a total of 26,000 jobs.
  • On net, private industries have increased payrolls by 2.1 percent from one year ago, but some industries have exceeded this average. Construction employment is up 3.2 percent from a year ago with the subsector of residential construction up 8.3 percent. Professional and tech services have increased by 2.7 percent with several subsectors including architectural and engineering, computer systems design, and consulting services exceeding 3.5 percent growth. Leisure and hospitality jobs are up 2.7 percent. Temporary help services continue to show strong but waning growth, up 8.1 percent in the year. Perhaps another sign of a strong labor market, child day care services employment rose by 3.6 percent for the year. By contrast, federal government employment fell 1.9 percent over the year while state and local government employment grew slightly, by 0.6 percent each.
  • The earnings picture was also good. As hours held steady, hourly and weekly earnings rose 2 percent in the past year.
  • Digging deeper into the household survey shows more good news. The drop in unemployment rate was caused by the number of employed persons increasing by more than the number of unemployed persons, not by discouraged workers leaving the labor force. The number of discouraged workers not in the labor force is down 350,000 from a year ago and at 676,000 is at the lowest level since December 2008 when there were 642,000 such persons.
  • While the labor force participation rate is unchanged from its 36-year low, improvement in the number of marginally attached and discouraged workers suggests this trend could result from demographic rather than economic factors.
  • If one were searching for a negative data point in this report, one could note that the number of workers with part-time jobs for economic reasons was up by 275,000 for the month, but this subset of data is quite noisy. Just last month, this figure was down nearly 200,000. From one year ago, the number of persons with part-time jobs for economic reasons is down by 650,000, on the whole a good sign.
  • What does this mean for markets? The Fed has moved away from a threshold unemployment rate as an indicator for considering rate increases, but the June employment report was strong across the board. Inflation expectations seem to be well anchored and inflation is, for now, under the 2 percent target, but there is some potential for higher inflation if the recent monthly pace of increase is sustained. It’s widely expected that the FOMC will taper the bulk of asset purchases before increasing rates, suggesting that the first rate increase is still 3 to 4 meetings off—roughly at the end of 2014 or early 2015. However, continued strong economic performance could speed up that timeline.
  • Additionally, mortgage rates could move suddenly higher in anticipation of rate increases, much as they did last summer when refinance and transaction activity was high. Steady purchase transaction volume and lower refinance volume could mean that mortgages rates may adjust in a more gradual fashion. In either case, as the economy improves—and today’s data clearly suggests it is improving—the overall trend for mortgage rates is up, not down.



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