Job Gains Bode Well for Real Estate Recovery

The Wall Street Journal this morning reported job gains last month of 163,000, citing newly released labor department statistics.  Employment recovery is critical to long-term gains in the housing sector, along with personal income growth and, I believe, consumer confidence (the US economy is 70% personal consumption).

The unemployment rate increased from 8.2% to 8.3%.  One might wonder how an econcomy can have a net gain of jobs but still have an unemployment rate that is rising.  It's an easy answer, although one that not many understand.  The Department of Labor calculates the unemployment rate as the number of people unemployed over the number of people employed.  These two items combined is the Labor Force.  People outside the labor force are those who have become discouraged, or for some other reason are no longer seeking employment.

So, if the unemployment rate rises at the same time more people become employed, as is the case this month, it actually means more people entered the labor market and the Labor Force grew, which points to optimism in job prospects.  Given all this, don't be alarmed to see a slight increases in the unemployment rate…it's quite normal to be coupled with job growth in a slow recovery period.

Everything you ever wanted to know about how employment and unemployment rates are calculated can be found here: http://www.bls.gov/cps/cps_htgm.htm.

 

Posted on August 3, 2012 at 1:03 pm
Travis Talbot | Category: Uncategorized

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