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Firstly, let’s get a little scholarly and break down the job numbers that came out last week:
These figures drew a ton of attention in the media because, on the surface, they were rather bullish! The good news, according to the report, was that the U.S. created 114,000 new jobs in September. Furthermore, the data for August was revised to show that, rather than the employment base expanding by 94,000 jobs, the actual figure was 142,000 jobs. What was even more astounding, however, was that the unemployment rate was slashed from 8.1% to 7.8%!
So what the heck is going on here?
I am not going to comment on potential conspiracy theories about the “books being cooked” because it insults the economic process that I am closely linked to. Rather, I’m going to focus on how the data is gathered. The government does this in two ways. The first is the household survey (a.k.a. Current Population Survey) and the second is the Current Employment Statistics survey – also known as the payroll survey. One calculates the unemployment rate, while the other calculates the number of jobs created in a certain timeframe.
The household survey is a monthly sample survey of approximately 60,000 households, while the C.E.S. survey is far larger and addresses 141,000 business and government agencies that cover approximately 486,000 establishments (or businesses).
According to the latest household survey, the number of employed adults increased by a whopping 873,000, while the number of adults saying they are either unemployed or looking for work increased by 418,000. The number of unemployed workers fell 456,000 and, therefore, the unemployment rate fell 0.3 percentage points to 7.8%. Much of this was due to the number of part-time workers that soared by 582,000. The payroll survey, however, increased by just 114,000 – the reported figure in the jobs report.
As an aside, it was also pleasing to see that there was a large decrease (-206,000) in unemployment among 20- to 24-year-olds. I am sure that there are a few readers of this blog who have children living back at home after having graduated from college. Hopefully these numbers are an indication that they will be headed off soon!
So what does this all mean? Well, my take on it is that the market continues to exhibit growth in jobs, but I suspect we will see some major revisions to these numbers as we head into the winter. That said, at this point, the glass is certainly half full.
The decision to buy a home rests on many factors. In addition to the obvious ones – the ability to qualify for a loan, finding a home that you want to buy, seeing a housing market that is either stable or starting to appreciate – we need confidence in the economy and, specifically, the job market. During the past couple of years, we haven’t had this confidence but that is starting to change. Our confidence in the job market is improving and, therefore, our consideration of buying a major asset, such as a home, has started to improve as well.
My belief in this statement is supported by home sales data from many parts of the country that continues to exhibit stability – albeit with woefully low levels of inventory – and modest increases in home values.
Confidence appears to be returning and this, in turn, is likely to become self-perpetuating. One month’s data is insufficient to state that all is better now, but improving job numbers are key to confidence, and confidence is key when it comes to the housing market.
