Post-hurricane jobs numbers not as strong as expected
The October jobs report is in, and the numbers are a mixed bag.
The U.S. economy added 261,000 nonfarm payroll jobs in October, according to the U.S. Bureau of Labor Statistics.
A hiring rebound at restaurants and bars impacted by recent hurricanes helped boost numbers. However, October’s jobs report fell short of economists’ forecasts of 310,000 new jobs.
The government also revised up employment numbers for August and September; 90,000 more jobs were added to the economy during those two months than previously thought.
“We expected a snapback after last month’s extremely low jobs number, and today’s report is a bit mixed but still positive,” says Tony Bedikian, head of global markets at Citizens Bank. “Today’s report isn’t a game-changer, but the overall economic trend is moving in the right direction.”
Construction hiring remained flat in October, which is worrisome. More new homes are needed to keep up with buyer demand. Builders still grapple with a shortage of skilled labor and rising material costs.
Jobs report reveals wages still lag home prices
Americans’ average hourly earnings fell by 1 cent in October to $26.53, after rising by 12 cents in September, according to the jobs report. In the past year, average hourly earnings have edged up by 2.4 percent.
That’s not nearly enough to help aspiring home buyers, says Cheryl Young, Trulia’s senior economist.
“Although employment increased, wages still lag unprecedented home-price growth,” Young says. “Therefore, relatively stagnant wages coupled with escalating home prices still make it difficult for potential homebuyers to break into the housing market.”
In September, the median existing-home price was $245,100, up 4.2 percent from September 2016, according to the National Association of Realtors.
To make the homeownership leap, wage growth needs to catch up, and the housing market desperately needs more inventory.
Proposed tax bill, low inventory tempers 2018 forecast
The year is almost over, and NAR has made its predictions about housing.
Lawrence Yun, NAR’s chief economist, estimates that existing-home sales will finish 2017 at a pace of 5.47 million — the best showing since 2006 (6.47 million). However, it’s only a slight improvement of 0.4 percent from 2016.
In 2018, sales will grow by 3.7 percent while the median existing-home price will jump 5.5 percent, Yun predicts.
Also, a slowdown in new construction is adding to backup in buyer demand, Yun adds. Homeowners are staying put longer (about 10 years), which hurts inventory levels and overall affordability.
“The lack of inventory has pushed up home prices by 48 percent from the low point in 2011, while wage growth over the same period has been only 15 percent,” Yun says.
Another wrench in housing’s future: the recently unveiled Republican tax bill. The tax reform, NAR says, strips away many of the financial incentives of homeownership, which could sideline even more buyers, especially those in more expensive housing markets.
Here are the main issues NAR sees with the tax bill in its current form:
- Caps the mortgage interest deduction to the first $500,000 worth of loans
- Eliminates state income tax deductions completely
- Implements a new $10,000 cap on property tax deductions
- Restricts the capital gains exemption homeowners receive after a home sale. The exemption allows them to use their home’s equity to pay for retirement and other long-term needs