Declining U.S. Employment Numbers Raising Concerns for Housing Industry

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Today's U.S. employment numbers for September 2015 were a disappointment for many in the housing industry.
 
Realtor.com Chief Economist Jonathan Smoke stated this morning, "The September employment situation report was a blow to confidence in the strength of the U.S. economy as it reflected recent weakness in job creation. Employment growth over the last two years has been a key driver of this year's robust housing demand."
 
Mr. Smoke continued his commentary, "The headline initial September job creation number of 142,000 was well below market expectations of 200,000.  Perhaps even more shocking were downward revisions to the July and August data.  Analysts had been expecting significant upward revisions to August, as the typical pattern, but instead July and August were revised down by 81,000 jobs.
 
"We had been seeing a level of job creation closer to 3 million on a trailing 12-month basis on average for the last year, but the revisions and the relatively weak September number change that trailing 12-month trend to 2.8 million.
 
"Job creation is a very important leading indicator of strong demand for housing. The strong employment results for the last two years created an uptick in household formation, which drives demand for home purchases and rentals.  If this softening sticks, we could see less robust growth in the year ahead.
 
"With the latest data, the average monthly number of jobs created this year is now 198,000, a 24 percent decline from last year's average of 260,000.
 
"A few data points in the report were more positive. The unemployment rate remained 5.1 percent, the lowest level since March 2008. The U-6 unemployment rate, which is the broadest measure of unemployment, fell to 10 percent, the lowest level since May 2008.
 
"Employment growth for 25-34 year olds also shows continued, solid progress. Over the last 12 months 719,000 jobs have been created for this critical age cohort.  About 33 percent of civilian jobs created over the last 12 months have been for the young adults who are most likely to buy their first home. This should help support continued growth in the share of homes purchased by first time buyers, as economic success has been influencing older Millennials to jump into the housing market this year.
 
"Finally, this weak report is already influencing the long-term bond market, so mortgage rates will fall in response. The average 30-year conforming rate was down to 3.86 percent yesterday, and rates will be lower until strengthening economic trends are more evident. This summer's home shoppers cited favorable interest rates as a top reason for being in the market for a home", concluded Mr. Smoke.