Total employment in November rose by 228,000 jobs, slightly less than in the previous month, which saw 244,000 new jobs. Excluding the low number of jobs added in September, owing to the hurricanes that hit Texas and Florida, the number of jobs added monthly since August has exceeded last year’s average of 167,000 jobs, highlighted by the red line in the chart below.
Remodeling Market Remains Strong
As reported last week, the overall economy grew by 3.3% In the third quarter, following a 3% growth in the second quarter. Generally, the strength of the jobs market confirms that the economy is on solid footing.
The unemployment rate remains at a historically low level; it was 4.1% in November. At the same time, there are over 6 million job openings in the U.S. But many of these jobs can’t be filled because employers have a hard time finding qualified people to fill those jobs. This is particularly true in the market for skilled labor — remodeling and construction-related fields — which is critical to the health of our industry.
The good news is that employment in residential remodeling companies rose further in October to 336,900 people. This is a gain of 1,300 jobs from the prior month. Moreover, as the chart below illustrates, the industry has added jobs in virtually every month since April.
Mortgage Rates Edge Up…
… But not by a significant amount. The fixed rate on a 30-year mortgage loan was 3.94 last week — up 0.04%.
The Federal Reserve Bank is very likely to continue with its policy of “easy money” for at least the next few months. This clearly implies that we should not see a drastic increase in interest rates, including mortgage rates, caused by a tighter monetary policy. Lending rates are therefore expected to remain favorable for home purchases or remodeling in the near future.
Despite the current favorable conditions on employment and income, consumers feel less optimistic toward the future than they were two months ago. According to the University of Michigan’s Index of Consumer Sentiment, the index has fallen from its peak in October.
According to the University’s findings, consumers have less-favorable opinions toward long-term prospects for the economy. Uncertainty about the impact of the proposed changes in the tax code appears to be driving this opinion. However, the other component of the index — consumers’ views on current conditions — improved further in early December.
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.
