The economy added 261,000 jobs in October, partly compensating for the poor performance of the previous month, when both Texas and Florida were reeling from the impact of the two deadly hurricanes, Harvey and Irma. Last month, the Department of Labor had estimated job growth in September to be 33,000. This figure, however, was lowered to just 18,000 in the latest estimate for that month.
Nonetheless, the average for the two months, September and October, is only 140,000 jobs, lower than the growth we’ve seen over the last 12 months (shown by the red line in the chart above)
Year-to-date through October, we have seen the creation of 1.69 million jobs. This is 12% fewer jobs than those created during similar period last year.
At the same time, the unemployment rate fell to 4.1%, the lowest since the beginning of the century. Virtually anybody who wants a job should be able to get one. But there are still a large number of people who, for one reason or another, stay away from the labor force. This is highlighted by the “labor force participation rate” that fell in October to 62.7%, near the lowest point in more than 20 years.
A paradox is that the low unemployment rate should put pressure on wages, as employers fight to hire among the smaller pool of available workers. But the average wage rate was only 2.4% higher in October than what it was a year ago; this is barely higher than the 2.2% increase in prices over the last 12 months. Workers are not seeing great improvement in their financial situation.
In contrast to the overall employment data, the remodeling industry saw robust employment growth in September. A total of 900 jobs were added by employers in remodeling firms for a total of 335,500 persons employed in the industry.
The line in the chart below shows monthly employment in remodeling businesses for the last 13 months. The bars indicate the monthly increase (light gray) or decrease (red) in employment for that month.
Despite the increase in the number of remodeling jobs, we find that homeowners’ spending for remodeling projects actually fell in September, by 0.6% to an annual rate of $187.9 billion. In fact, as can be seen in the chart below, remodeling spending reached a peak of $193.3 billion back in June, and it has fallen in two out of the last three months.
The rate of spending on remodeling has thus slowed for the last three months. Still, total spending for the year is running nearly 20% higher than last year. Through September of this year, homeowners have spent $143.8 billion on remodeling their homes, up 19% over the $121.2 billion spent between January and September of 2016.
House prices are still increasing at vigorous rates; in September they were 4.2% above last year. These price gains translate into higher equity for homeowners that has led many to take some out some of that equity and use it for a variety of purposes, including home remodeling.
Additionally, mortgage rates remained unchanged at 3.94% last week. There we no significant changes in either demand or supply of credit to the mortgage markets.
Moreover, President Trump’s appointment of Jerome Powell to become the chairman of the Federal Reserve Bank next February implies that the current monetary policies will be the standard for the next few years. The expectation of most economists is that Powell will continue pursuing the same policies followed by current Fed chair Janet Yellen. That is, there will not be a sharp change from relative ease to more tightening.
Manuel Gutierrez, Consulting Economist to NKBA
Explanation of NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator with a colored triangle that highlights visually the recent trend for each of the drivers. “Green” is a positive signal, indicating that the latest value is improving; “Yellow,” as it’s commonly understood, denotes caution because the variable may be changing direction; “Red” indicates that the variable in question is declining, both in its current value and in relation to the recent past.
Note that all the data, except for “mortgage rate” and “appliance-store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.
Single-Family Starts. This is the number of single-family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.
Existing-Home Sales. These data are issued monthly by the National Association of Realtors, and capture the number of existing homes that were sold in the previous month.
High-End Home Sales. This series are sales of new homes priced at $750,000 and higher. The data are released quarterly by the U.S. Department of Commerce, and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.
Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building-Materials Sales. These data, released monthly by the Department of Commerce, capture total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also includes sales to projects other than residential houses.
Appliance-Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as home centers, for instance.
We hope that you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.
