Economy Watch: What the Employment Numbers Tell Us About Real Estate

By Dees Stribling, Contributing Editor

Do monthly employment reports matter? They’re one of the most closely watched metrics of the economy, taking outsized importance especially before elections (inspiring borderline slanderous comments about the integrity of the Bureau of Labor Statistics just ahead of the 2012 election, for instance, when the reports seemed too good). Certainly the Federal Reserve asserts that it’s paying attention to them, if not on a monthly basis, than at least as the months form a pattern. So far this year growth in employment has been reasonably strong in most months (except March, at a net of 119,000), but not generally as strong as the run of monthly reports in the second half of 2014, which saw two months in a row over 300,000—and one of those, November, was over 400,000.

Every month, ADP publishes its private-employment estimates as a kind of preview to the BLS numbers on the first Friday of the month. These reports rarely jibe with each other, but sometimes ADP hints at whether the official report will include weak or strong numbers. On Wednesday, ADP said that private-sector employment increased by 185,000 jobs in June. The report, which is derived from ADP’s payroll data, measures the change in total nonfarm private employment each month on a seasonally adjusted basis. If the company’s report hints correctly, that means a middling month for hiring when the BLS reports on Friday.

For individual real estate markets, local employment numbers are probably a better metric in assessing underlying fundamentals. Those have been reasonably strong as well in recent months. Late last month, the BLS reported that unemployment rates were lower in June than a year earlier in 351 of the 387 metropolitan areas that the government tracks, higher in 28 areas, and unchanged in eight. Six areas enjoyed jobless rates of less than 3 percent (including Bismarck and Fargo, ND, each at 2.9 percent) and five areas had rates of at least 10 percent (Yuma, Ariz., is at 22.6 percent, for instance).

Those are fairly small markets, however, with small amounts of real estate activity. Of the 51 metropolitan areas with a 2010 Census population of 1 million or more, Austin-Round Rock, Texas, had the lowest unemployment rate in June, 3.3 percent, followed by Salt Lake City with 3.6 percent. Las Vegas-Henderson-Paradise, Nev., and Memphis, Tenn.-Miss.-Ark., on the other hand, had the highest jobless rates among the large areas, coming in at 7 percent each. Fifty large areas had year-over-year unemployment rate decreases in June and one had no change. The largest rate decline occurred in Detroit-Warren-Dearborn, Mich. (down 2.3 percentage points).