Various reports show the national economy is improving. This includes data this week that showed a 3.4% increase in pending home sales in March, and an employment report in which 273,000 new jobs were added in April.
Although the first-quarter GDP slowed to only a 0.1% increase, it appears largely related to the extreme weather experienced this past winter. Indeed, the Federal Reserve seems to agree, continuing to take its foot off the accelerator by tapering bond purchases. This policy, known as quantitative easing, was instituted a few years earlier to keep long-term interest low and spur economic activity. This includes mortgage rates to give a boost to the then troubled housing sector.
However, the national economy can paint a very different picture than the local economy. We will hone in on New York City, and its impact on housing.
According to this report from the United States Bureau of Labor Statistics (BLS), there is good news for New Yorkers. Unemployment rates have been falling. In the BLS’ latest report, as of February, the city’s unemployment rate fell to 8.6%, from 9.2% in the year earlier. The national unemployment rate fell to 7.0% from 8.1% in the same period.
This has positive implications for the housing market. As people get back to work, they will be able to save and purchase a house. This also makes it easier to qualify for a mortgage. Also, those employed feel more confident about their current employment situation and have less fear of losing their job. Lastly, those looking for a new job can find one more easily. All have positive implications for the housing market. Consequentially, this leads helps the economy as more people purchase items such as furniture.
Although this is good news on both the national and local economic fronts, we can get more granular. Manhattan had the city’s lowest unemployment rate, at 6.9%. This is down from 7.6% a year earlier. On top of the positive news on employment, the borough also has the highest wages, with an average of over $1,000 a week. The combination has positive implications for the housing market, although we do not know the wage level of the new jobs. While all boroughs experienced a drop, Bronx’s unemployment rate remains the highest at 12.0%.
The number of private sector jobs has also increased, indicating the drop in unemployment is not just from people dropping out of the workforce. Mathematically, the unemployment rate is the number of unemployed divided by the labor participation rate. However, if people are not actively looking for work, they are excluded from the denominator.
Total non-farm employment rose 2.2%, to nearly four million. The only sector that had a decline was the government. This is not surprising, given the budgetary issues many municipalities, including New York, experienced. Analyzing major private sectors, employment in Education and Health Services rose 3.2%, to over 833,000. Professional and Business Services had a 2.9% increase in the number of jobs, to over 648,000.
Employment rolls in Trade, Transportation, and Utilities expanded 3.7% to nearly 605,000. Financial Activities, which have had a rough time, saw a 0.3% rise, to over 434,000 jobs.
Employment is an important economic factor, especially for the housing market. After a rough stretch, the data suggest job is on the rise. Barring an unexpected economic slowdown due to unanticipated factors, the housing market appears poised to continue strengthening.