One of the challenges to economic recovery in the U.S. has been the glut of houses on the market as a result of the burst housing bubble that caused the great recession in the first place. A robust, job-creating recovery typically relies heavily on the construction sector for a substantial portion of the jobs created–I’ve seen numbers in the area of 25%. So some economists are tempering the positive economic trend by pointing out just how much of an albatross the housing sector still is.
Friday’s jobs number continues the good news/bad news drift. On the one hand, employment is improving rapidly among 25-34 year-olds, the prime age group for housing demand. 74.7% were employed in February, where only 73.9% were employed a year ago. The unemployment rate for this group dropped from 9% in January to 8.7% in February. Likewise, construction employment was up 2.5% compared to three months ago, a slight improvement over other job creation during the same period.
But that’s not enough to pull the economy out of the housing ditch its in, says Jed Kolko, chief economist and head of analytics at Trulia. “Today’s jobs report means housing demand will pick up: as young people go back to work, they’ll be able to rent their own place or start saving for a downpayment. Construction is picking up, too, but not fast enough to lead the recovery. To get back to its traditional share of jobs, construction needs to catch up from its long slowdown by outpacing overall growth. Right now construction employment is keeping pace with the overall economy but not growing fast enough to get back to its normal share.”
Similarly, Austan Goolsbee, the former White House economist, expects housing to continue to be a drag on the recovery, and expects GDP to slow in coming months as well. In that scenario, job creation and broader economic recovery flatten over the summer, with the political consequence that Romney’s arguments against Obama gain credence.