Unemployment Numbers Mean Trouble for Housing
- Jun 06, 2008
Yesterday, we talked about how the housing decline was costing Hispanics construction jobs–but, according to today’s unemployment report, the whole industry is suffering.
That’s not to say that Hispanic workers are any better off than they were earlier this week, as evident by the number of articles that have popped up in the past few days about the issue, including:
- One in the Washington Post, which features
Javier Amurrio, a 38-year-old immigrant from Argentina who was unemployed for 7 months in 2007 and became one of the Hispanic homeowners discussed in our earlier blog who lost his home as a result;
- And an article in the Chicago Tribune, that mentioned that African-Americans also have struggled with a 9 percent
unemployment rate in the first quarter;
But it is today’s government report, showing that the unemployment rate rose 5.5 percent in May–which is the biggest increase in two decades–that is particularly worrisome. We knew various sectors were sagging; now, it looks like unemployment is become a harsh reality and risk for almost everybody.
According to the Bureau of Labor Statistics, employers cut 49,000 jobs last month: 49,000 jobs.
We’ve been on a job losing streak all year. And, not surprisingly, construction is one of the hardest hit sectors because of a declined demand. Construction employment sunk by 34,000–its 11th consecutive drop–The Wall Street Journal said.
The financial industry dropped 1,000 jobs; retail lost 27,100, its sixth-straight decline.
One small good point of news: Average hourly wages increased by $0.05–0.3 percent–to $17.94, a 3.5 percent increase from 2007, which the Journal said suggests that wage costs are remaining manageable.
But that’s only good news, of course, if you still have a job. And judging by today’s numbers, many don’t.
The continued unemployment rate growth–if it does in fact increase again in June–is likely to have a huge effect on the already struggling U.S. economy. How are Americans going to cope with less (or no) income when necessities like food and gas prices keep rising?
Well, consumer spending is going to take a hit. We’ve already seen a drop-off this year in big-ticket item sales. And we’ve seen a decline in demand for new homes.
The bottom line: If unemployment keeps rising, Americans are going to hold on to what money–and property–they have, and we can kiss any hope of the housing slump turning around by early next year good bye.
Even if people want to move into a new home during these trying times–which we hope they will, since the bloated housing inventory needs to decline before home prices and construction demand significantly pick up–it’s going to be tough.
Financing is hard enough to get if you have good credit these days–but apply for a home loan without a job? Forget it.
The housing market should be concerned that unemployment is rising–and not just because it’s hit the construction sector hard.
The question is: How do we begin to turn this messy, troubled economy around?
Will it take more jobs? Less expenses? Incentives for Americans to buy homes, like the National Association of Home Builders and Toll Brothers CEO have suggested?
What do you think?