KEY MARKET INDICATORS as of Jan 04, 2019
December Job Market Report
The U.S. job market showed remarkable strength at the end of 2018, adding 312,000 jobs in December. The job market is at full employment, with the overall unemployment rate unchanged at 3.9% – close to its lowest level since 1969. Job growth has re-accelerated this year, totaling 2.6 million. The unemployment rate ended 2017 at 4.1%, which already qualified as full employment. But the faster pace of job growth helped to lower it yet more, ending the year at 3.9%. With the financial market obsessed about an economic slowdown, the December job market report was welcome news to re-focus on data instead of market volatility.
One definition of full employment is that it is a threshold level of unemployment below which would result in faster wage growth. That is indeed what happened in 2018 as wage growth accelerated from 2.7% at the end of 2017 to 3.2% at the end of 2018. This is an important data point for interest rate-sensitive sectors such as housing and was an important factor in driving up the yield on both the 10-year U.S. Treasuries and the 30-year mortgage rates. As stated previously, faster wage growth is a sign of labor market tightening and accelerating inflation at this point in the cycle, and is hurting housing through higher interest rates. Higher wage growth is also related to faster turnovers in the job market as more workers switch jobs. Those job changes often trigger home-buying, but as pointed out in the First-Time Homebuyer Report, the repeat buyer market has yet to benefit from the tighter labor market up to this point.
The kind of strong job growth in December was only possible with broad-based and strong gains across many sectors, including education and health, tourism and hospitality, professional and business services, and manufacturing. The slowdown in the housing market has not slowed demand for construction workers. While the number of jobs in the economy grew by 1.8% over the past 12 months, sectors such as natural resources and mining (up by around 9% from a year ago), construction (up by 4%), transportation, professional and business services, and manufacturing grew much faster.
The job market is providing a favorable economic environment for potential first-time homebuyers. Unemployment rates for people in the primary homebuying age (25-34 and 35-44) are now at 3.5%, close to the lowest level in nearly 50 years. Employment for this group grew by 2.4% in 2018, the fastest pace since 1989, as more Millennials entered the labor force. Over the past two years, the 25-44 age group has accounted for 60% of the job growth. Just as the first-time homebuyers are becoming more important to the housing market, younger workers are becoming more important to the labor market.
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Disclaimer: Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Genworth Mortgage Insurance and are subject to change without notice. Genworth Mortgage Insurance has no obligation to provide revised assessments and assumes no duty to update information in the event of changed circumstances. While we have gathered this information from sources believed to be reliable, Genworth Mortgage Insurance cannot guarantee the accuracy of the information provided. Certain data discussed in this report is publicly available only on a time delayed basis. Genworth Mortgage Insurance strives to analyze data as it becomes available, but makes no representation that all data is reviewed immediately upon release.