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Mar. 7, 2014

Economy Watch: Moderate Job Growth; Household Net Worth Increases; Negative Residential Equity Shrinks

By Dees Stribling, Contributing Writer

The modest increase in U.S. jobs continued in February, with the Bureau of Labor Statistics reporting on Friday the addition of 175,000 new jobs to the economy during the month. Employment increased in a number of industries, such as in the professional and business services category, but dropped in others, such as retail. Job growth has averaged 189,000 per month over the previous 12 months, so the current report is still weaker relative to most of the past year.

The unemployment rate, which is based on a separate survey by the bureau, ticked up 0.1 percentage points for the month, to 6.7 percent. The BLS measurement of unemployment known as U-6, which includes the unemployed who are actively looking for work, but also discouraged workers and part-time workers looking for full-time work but who can’t find it, came in at 12.6 percent in February, 12.7 percent from January. The U-6 a year ago was 14.3 percent.

On Thursday, the U.S. Department of Labor reported that for the week ending March 1, initial unemployment claims were at an annualized rate of 323,000, a decrease of 26,000 from the previous week’s revised figure. The four-week moving average, which is less jumpy, was down a bit more than usual to 336,500, a decrease of 2,000 from the previous week.

Household Net Worth Hits Record Level in Q4 

The Federal Reserve reported on Thursday that U.S. household net worth increased again in the fourth quarter of 2013 to a record level, mostly on the strength of increases in the equities markets (and thus benefiting the upper tiers of households most), but also because of the recovery in the housing market. Household net worth came in at about $80.7 trillion in the fourth quarter 2013, compared with about $77.7 trillion in the third quarter, and $55.6 trillion in the first quarter 2009, which was the post-panic trough.

Household net worth as a percentage of GDP held surprisingly steady across the decades of the late 20th century, and — despite recent gyrations — has even increased in the 21st century. From the 1950s to the 1990s, the total hovered around 350 percent of GDP. The housing bubble (mostly) drove that up to more than 450 percent in the mid-2000s, but the crash only brought it back down to 350 percent. As of the end of 2013, net household worth as a percentage of GDP is back above 450 percent.

The Fed also noted that in the fourth quarter, household percent equity — the ratio of aggregate home values to aggregate mortgage balances outstanding — was at 51.7 percent, the highest level since before the recession in the second quarter of 2007. The number has been increasing recently because of the rising in house prices and dropping mortgage debt. Still, historically speaking, household percent equity is low. After dropping from about 80 percent in the early 1950s and hovering between 60 percent and 70 percent for the rest of the 20th century, the metric fell like a stone to below 40 percent with the coming of the real estate crash in 2008, from which it has only partly recovered.

Negative Residential Equity Shrinks in ’13

CoreLogic reported on Thursday that 4 million U.S. mortgage holders returned to positive equity in 2013, bringing the total number of mortgaged residential properties with equity to 42.7 million. Still, that means that nearly 6.5 million homes, or 13.3 percent of all residential properties with a mortgage, were still in negative equity at the end of 2013.

Wall Street had another mostly up day on Thursday. The Dow Jones Industrial Average gained 61.71 points or 0.38 percent, while the S&P 500 was up 0.17 percent. The Nasdaq edged down 0.13 percent, respectively.

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