Forecast Update: Job Openings and Labor Turnover, Mortgage Applications, Jobless Claims, and More

A weekly analysis of the economic data released during the past week, and how current economic conditions are affecting the real estate market.

• The apartment market is coming into 2011 with strengthening fundamentals—lower vacancies and rising rents. Data from CBRE Econometric Advisors projects rents to increase 1.4 percent during 2011.
• The National Multi Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions released in January, recorded a Market Tightness Index (MTI) of 78, a one point increase from October 2010—60 percent of respondents considered conditions in local markets to be tighter than the previous quarter. A MTI above 50 indicates that apartment markets are getting tighter, while values below 50 indicate looser market conditions.
• From the January 2011 Commercial Real Estate Quarterly Market Survey, multifamily vacancy rates in commercial REALTOR markets declined from 11.4 percent in the third quarter 2010 to 8.9 percent in the fourth quarter. Members in several areas of the country pointed to improving conditions and declining rents.

• The Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (JOLTS) results from December this morning. Total job openings slipped by 139,000 from November, but were 532,000 higher than in December of 2010. The number of hires rose 187,000 over this same 12-month period. The manufacturing and professional and business service sectors reversed course on hiring in December after posting strong figures in November, while the trade and transport and construction sectors expanded.
• On the other side of the coin, total separations edged up by 8,000 in December, but the bulk of these were voluntary as the number of layoffs and discharges slipped by 16,000. The December JOLTS report shows a light pull back on the part of job openings and hiring in the private sector, but workers confidence remains strong though muted. The construction sector is showing strengths, though from historically low levels of production.
• Jobs are critical to the economic and housing recovery and businesses hire and create new jobs when there is demand for their goods. The upward trend in credit use signals that consumers are spending again and banks are helping to finance it. Job creation continues to sputter, but it is on an upward trajectory. Still, much more job creation is needed. Read the Bureau of Labor Statistics’ JOLTs Survey.
• Consumer credit jumped $6.1 billion in December according to the Federal Reserve for an annualized increase of 3.0 percent. Both revolving and non-revolving credit rose. Lending at banks fell in December, while loans held by financial institutions jumped by nearly $30 billion. Falling interest rates have made borrowing more attractive to consumers.

• Mortgage purchase applications fell 1.4 percent for the week ending February 4th. Purchase applications do not always translate into loan acceptances and transactions. Also, purchase applications do not take into consideration cash buyers, who according to the November REALTORS® Confidence Index make up as much as 31 percent of transactions. In Las Vegas and Miami, the cash purchases have been said to approach 50 percent.
• Mortgage purchase applications were down 15.9 percent from the same week a year ago.
  Refinances, which made up 66.6 percent of mortgage activity, fell 7.7 percent as mortgage rates were up significantly to 5.13 percent on a 30-year fixed mortgage. To find out more read the Mortgage Bankers’ Association press release.

• New jobless claims fell another 36,000 to 383,000, the lowest level in last 2.5 years.  The four week average also fell significantly by 16,000 to 415,500. Continuing claims also fell 47,000 to a two-year low of 3.888 million. The level of new jobless claims, which is below 400,000, suggests we should be soon seeing more job creation than job losses.
• The states with increases in initial claims were California, Pennsylvania, Massachusetts, Wisconsin, and Puerto Rico, while the largest decreases were in North Carolina, Georgia, Alabama, Tennessee, and New Jersey.
• There have been 984,000 net new job additions in the past 12 months. Assuming that jobless claims continue to trend down, NAR expects about 1.5 to 2 million net new jobs in the next 12 months. For more information, see the Department of Labor press release.

• There was a slight decline in the trade balance as the growth of imports outpaced the growth of exports in December 2010. Overseas demand drives US exports and creates domestic jobs while imports are a sign of domestic demand that drives growth overseas. While employment in goods producing industries remains well below pre-crisis levels, these industries have added 87,000 jobs in the last 12 months.
• Exports are only about $3 billion shy of their 2008 peak while imports are about $28 billion lower meaning the post-crisis balance of trade has improved for the US. Both exports and imports declined sharply during the recession and have improved markedly as markets have normalized.
• Separately, the preliminary reading for Consumer Sentiment in February improved slightly over the January reading and at 75.1 is near its post-crisis peak of 76. The rise was due to improvement in consumer attitudes about current conditions while expectations for the future worsened slightly.
• Consumer sentiment is generally a predictor of how consumers will spend in the months ahead, and an improved reading suggests that the improved spending of the last 6 quarters will continue in the next few months.

©National Association of Realtors – reprinted with permission