The Housing Slump Won’t Cause A Recession

… at least, not according to today’s report on the economy.

Data released by the Labor Department today showed that wages and jobs were both up in September. That’s good news for the U.S., considering the recent dour housing news — the National Association of Realtors announced this week that its index
of signed purchase agreements fell to lowest level on
record, and residential building hit its lowest spending level since 2003 — had sparked fears we were tumbling into a recession.

And, as it turns out, last month wasn’t as bad as we thought. In August, figures indicated the U.S. had experienced its first job loss in
four years, causing economists to use the "r" word; however, revised figures show the economy actually added 89,000 jobs in
August — not the 4,000 first estimated by the
government.

Some additional good news:

  • Employers upped payrolls by 110,000, the most in a single month since last
    May, the Associated Press reports.
  • The new 4.7 percent unemployment rate is the highest since the summer of 2006, but is still low compared to the rate’s historical record, according to AP.
  • AP also reported that the employment news helped the stock market today — Dow Jones industrials rose more than 100 points, AP says.

But Before You Break Out the Champagne and Start Dreaming About Investment Properties …

Unfortunately, the good job news didn’t necessarily extend to the housing industry (and related sectors).

The Labor Department said construction firms cut 14,000 jobs last month, residential specialty trade contractors cut 15,000 in September (and 160,000 since February 2006) and financial services
companies cut 14,000 jobs.

In addition, despite U.S. wage increases that should have put more money in shoppers’ pockets, the retail industry — long considered a strong economic indicator because it reflects consumer spending — eliminated more than 5,000 jobs, according to AP.

So what sectors added to the job gains? Education (don’t forget — it’s back to school time) and health services, professional services, leisure and hospitality and government.

The Economy — and Housing Industry — Still Has Some Work to Do

While we might not be recession-ready, we’re not out of the woods yet. A few reasons:

  • Job growth may have been up last month, but it has slowed. An average of 97,000 jobs a
    month were created during the third quarter, down from a 126,000-a-month average in the second quarter, according to IndustryWeek.
  • Economic growth is declining, too. Economic growth expanded at 3.8 percent pace this spring; it’s now thought to have slowed to a 2.4 percent or
    less pace in the July-to-September quarter, according to AP. It may slow further before the end of the year.
  • Unemployment is expected to rise. It already has — just last week, there were 16,000 more first-time claims increased than expected (economists had predicted 310,000, according to Forbes.com.). AP reports that some economists think the unemployment rate will hit 5 percent this year.

That’s still not considered a dangerous high point — however, it is higher. And given the recent negative housing market news, the slump is likely to pull the economy down a bit further before it rebounds.

But it’s good to know, at least, that the Labor Department — and the media — don’t think the residential sector’s problems will lead to a recession problem. At least not today.