LoginHome prices have now been rising for eight months, and are now
up more than 11 percent from a year ago, according to the National
Association of Realtors. The current supply on the market fell 1.4
percent in October, representing a 5.4-month supply, down from 7.6
months a year ago and the lowest level of supply since early
2006.
If home prices continue to rise as expected, it will have two
significant effects on the labor market in the coming year and
years ahead. The most direct result will be the increase in U.S.
home construction. Not only did new home starts jump at an
annualized rate of 15 percent in September, existing home sales
often also results in more construction jobs as home owners
renovate before selling or after purchasing.
“Construction employment is still down by 2.2 million jobs
compared to its pre-recession peak and has had virtually no
recovery,” says Rob Romaine, president of
MRINetwork. “Despite being less than 5 percent of
the total U.S. workforce, that represents more than half of the 4.2
million jobs deficit from the pre-recession peak. Any economic
activity that can increase employment for the sector will have the
most immediate effect of reducing total U.S. unemployment and
increasing U.S. consumer spending power.”
Rising home prices will also add to U.S. spending power in
another way– increasing equity. The cumulative growth in home
equity has added $760 billion in equity to the U.S. economy, nearly
equal to the $787-billion economic stimulus package approved in
early 2009. Yet, that program was phased in over three years,
whereas growing home equity will add another $1 trillion in the
next year. While home equity can’t immediately be spent on
groceries or a new TV, especially if a mortgage is underwater, it
can make obtaining credit easier, and can make consumers more
confident to spend the cash they do have. Receipts from the holiday
shopping season are just starting to be tallied but projections
suggest total revenue in 2012 will grow by 4.1 percent, above the
3.5 percent average growth in the last decade.
“About 700,000 temporary retail jobs have been created this
holiday season, up from last year. But retail jobs are just the
last link in a long chain of jobs created by Black Friday and the
weeks after it,” says Romaine. “Should projections for a strong
holiday season pan out, revenues over the last five weeks of the
year will spur a new round of hiring for product development,
design, manufacturing, supply chain, marketing, and branding
professionals and managers to create and sell products for the 2013
holiday season.”
While the economy’s momentum continues to build, several
significant and fast-approaching storm clouds remain on the
horizon. Lawmakers have pushed several critical decisions into the
post-election season. Consequentially, before the new year, a lame
duck session of Congress will need to revisit a series of temporary
tax cuts set to expire, new taxes set to be levied to support the
Patient Protection and Affordable Care Act (PPACA), expiring
extended unemployment benefits, a 30 percent reduction in Medicare
payments to doctors, and the first of eight annual $109 billion
cuts in defense spending.
Collectively known as the fiscal cliff, should the laws stand as
they are now written, more than $500 billion will be removed from
the economy in 2013, causing a projected 0.5 percent drop in GDP.
According to the Congressional Budget Office, this double-dip
recession could cause the unemployment rate to surge back to 9
percent by the end of 2013.”
“No one expects the fiscal cliff to occur in its current form,
but what compromises will be made are still largely unknown,” says
Romaine. “Should the compromise be modest enough to prevent a
double-dip recession, momentum in both the residential real estate
market and consumer goods sectors bode well for unemployment to
continue to decline next year as demand for professionals across
industries will remain strong.”