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Real Estate Market Commentary - April & May 2013
by Peter L. Zachary, MAI, MRICS

This is a combined April and May real estate commentary because there were two conflicting articles in the New York Times – one in April and one in May. On April 6, 2013, the headline on page 1 stated “A sharp Drop in Job Growth Shows Concern – Jobless Rate at 7.6% - 88,000 hired”. This article started with “It looks like the spring swoon is back and American employers added an estimated 88,000 jobs to their payrolls last month, compared with 268,000 in February, according to a Labor Department report released Friday. It was the slowest pace of growth since last June, and less than half of what economists had expected”. This was a pretty gloomy article. One month later on May 4, 2013, the front page of the New York Times had an article entitled: “Jobs Data Eases Fears Of a Sharp Slowdown; Joblessness Dips to 7.5% Nearly 200,000 a Month in 2013 Gain Work". It stated, “Washington may be hitting the brakes, but the private sector is still rolling ahead, helping create nearly 200,000 jobs a month, on average, since the beginning of the year and forcing the overall unemployment rate in April down to its lowest level since the end of 2008.

This push-and-pull dynamic was evident in data released Friday by the Labor Department, as private employers added 176,000 people to their payrolls even as the public sector shed an additional 11,000 workers. The latest figures painted a somewhat brighter picture of the overall economy than had been expected as the government sharply revised upward its estimate for job creation in the previous two months. Those revisions concluded that the economy generated a robust 332,000 jobs in February, not the 268,000 originally reported, and 138,000 in March, up from 88,000.

The news sent the stock market soaring to new highs, with major stock market indexes closing up 1 percent for the day. Still, at 7.5 percent, a slight drop from last month’s 7.6 percent, the jobless rate remains far higher than it typically would be this far into a recovery. It is also a full percentage point above the level the Federal Reserve has said it wants to see before it will consider raising interest rates from their current levels near zero. As a result, most experts expect the economy to continue to be buffeted by countervailing factors in the months ahead, with business activity and the Fed providing a healthy measure of support for growth even as fiscal austerity in Washington makes a substantial drop in the unemployment rate unlikely.

Despite repeated fears of a double-dip recession, an economy that has endured a spring swoon for three consecutive years and other potential perils, the country’s rate of job creation has been remarkably steady, if subdued. Over the last three years, the economy has added an average of 162,000 jobs a month, within a hairbreadth of April’s pace, at least as initially estimated, of 165,000 new jobs. “If it weren’t for the government, the economy would be stronger,” said Mr. Daco, citing the spending cuts hitting now, as well as the higher Social Security deductions for all workers and increased income taxes for top earners that began in January.

On the other hand, he said, “If the Fed hadn’t loosened monetary policy, we’d be seeing weaker growth. Both sides are generating opposing forces.” “While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression,” Alan Krueger, chairman of President Obama’s Council of Economic Advisers, said in a statement. The jobs report provided plenty of fodder for differing views. On the positive side, the size of the labor force increased, while the total number of unemployed Americans dropped by 83,000 to 11,659,000. What’s more, the ranks of the long-term unemployed, defined as workers who have been out of a job for 27 weeks or more, declined especially sharply, falling by 258,000 to 4.4 million. That is still far above what is typical at this stage of a recovery, but it is a marked improvement from past months. The long-term unemployed have been a particular cause of concern for economists in this recovery, because skills degrade the longer a person is out of the work force, and employers are reluctant to hire someone who has not held a job in a while.

On the downside, the least-educated workers continue to bear the brunt of elevated joblessness, with the unemployment rate for workers who failed to graduate from high school rising to 11.6 percent from 11.1 percent in March. At the other end of the education spectrum, unemployment among people with a college degree or more remained at a low level, rising by 0.1 of a percentage point to 3.9 percent. “In one line: Not bad, especially in the light of beaten-down expectations,” said Ian Shepherdson, chief economist with Pantheon Macroeconomic Advisors, after Friday’s report. “This could have been much worse.”

More next month... Read previous Real Estate & Housing Market News.

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