National Economic Outlook - March 2017

Written By:
Ingo Winzer, President

Local Market Monitor

We like to measure the growth of the economy in terms of jobs - rather than Gross Domestic Product, for example - because jobs translate directly into demand for housing. For some time now it's been clear that the economy is not creating the kinds of jobs it used to. A third of the new jobs created in the past two years are in restaurants, social services and retail stores, where pay is less than half the national average of about $50,000. At the other end, only ten percent of new jobs (mainly finance and  computer related) are in businesses where pay is close to $100,000.

Clearly, the former jobs encourage renting, while the latter spur home buying. Going forward, we'll more closely monitor the growth of low-end and high-end jobs.

As mentioned last month, we believe that the economy will be growing at a slower rate over the next few years. Because of the low level of home construction over the past decade, demand will nonetheless outstrip supply, pushing prices and rents up, but not in all markets. Higher interest rates will cut demand somewhat by increasing the cost of mortgages and decreasing the appeal of rental investments. This is not a danger point, but closer attention to the dynamics in individual markets is a good idea.

Jobs in February were up 1.7 over last year - flat in manufacturing, up 3.5 percent in construction, 1 percent in retail, 2.3 percent in finance, 3 percent in business services, 2.4 percent in healthcare, 2.3 percent at restaurants, and 1 percent in government.

Jobs in truck transport were up 1.3 percent - better; and temp jobs were up 3.2 percent - good.  

Low-end jobs (restaurants, social services, retail) increased 472,000; high-end jobs (finance and insurance, information, computer services) increased 210,000.