The state of the national economy continues to be a drag on the long term health of the housing market.
It’s been several years since the United States’ economy left the recession and started making positive contributions to the GDP. However, below average job growth remains one of the key stumbling blocks to a more robust housing market.
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Job Growth in Construction Holding Back Housing
The jobs report that we get every month from the federal government paints a picture of an economy that is still very much struggling to make headway. Construction in the private sector remains down, though many agencies like the National Association of Realtors believes it needs to increase in order to keep up with demand.
According to Jed Kolko, Chief Economist at Trulia blogs, “The September jobs report [] was grim for housing. Although residential construction jobs are outpacing overall job growth, the most recent quarters (Q2 and Q3) had slower construction job gains. Worse, the job market isn’t’t improving in the areas where it would most help housing demand: among young adults, and in clobbered metros.”
Millennial’s Not Moving the Housing Market
Andrew Warren, director of PwC, a research and advising firm, says that millennials are contributing to the broader economic recovery. At the same time, they simply aren’t buying as many houses or renting as often as their parents were at their age.
They often find themselves working at jobs where wages aren’t keeping up with the cost of living. This is due to a number of different factors. The internet and globalization has removed many traditional barriers between employers and employees.
To give some perspective, the 25-34 year age group has traditionally been considered the prime age group to spur housing demand. There is one glaring problem though in the present day. Only 75% of this group is currently employed. And those that are able to find jobs are all too often underemployed. To make things even more difficult, the jobs on offer today are more likely to require college degrees or even graduate degrees.
Those who are managing to get by usually have two jobs and may often be going to school at the same time. So, the problem with high unemployment among millennials may not necessarily be attributable to systemic character flaws in an entire generation of human beings. Rather, the changing reality of today’s job market is something that the millennial generation is struggling with to a greater degree than many other generations.
The question then becomes what can be done to move this huge segment of the population into buying and renting. One would hope that the answer to that question is time. Perhaps as more of this age group graduates from college or receives specialized training, they will be in a better position to get high paying jobs.
My fear is that the problem could be deeper than that. Understanding why unemployment levels remain unusually high among this younger generation is the key to helping fix the economy. If the job market and housing market are going to make serious progress in months and years ahead, this issue must be tackled head on.
