Signs of Life in Home Building

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A home under construction in December in Wilmette, Ill.Credit Nam Y. Huh/Associated Press

In a perfect world for the housing industry, the employment picture contains a virtuous cycle in which housing drives jobs and jobs drive housing. Some analysts found evidence of that Friday in the January jobs report.

The construction sector had its largest gain — 48,000 jobs — in almost four years. While some of that was a recovery from a drop of 22,000 jobs in December, the residential component of the sector did not drop in December and has added close to 200,000 jobs since housing began to recover in early 2012. Of course, the housing sector sank so low during the crash that it is still seeing a rebound effect. Last month the nation’s largest home builder, D.R. Horton, said its quarterly earnings had risen by 86 percent.

The real question is whether, once the industry has made up some of its lost ground, there will be new customers, not just homeowners trading up. More than half of first-time home buyers are between 25 and 34, and things were looking up for that age group: January was a postrecession high point for their employment rate (though it still has not returned to prerecession norms).

“If one is looking for a positive sign for home buying later this year as well as for autos, this is the most powerful one,” wrote Steve Blitz, the chief economist at ITG Investment Research.

Only 12 percent of 25- to 34-year-olds who have jobs live with their parents, says Jed Kolko, the chief economist for Trulia.com, compared with fully 20 percent of those who are unemployed. So the better the employment picture for that age group, the bigger the demand for housing.

Mr. Kolko also came up with one other measure he said was important for housing demand: job increases in what he refers to as “clobbered cities” — those where the housing crisis was particularly bad. Mr. Kolko found that those cities — including Phoenix and Orlando and Tampa in Florida — outpaced the rest of the country in job growth, at an average of 2 percent year over year versus 1.7 percent nationally. But some clobbered cities, like Detroit, lost jobs.

Robert Denk, an economist for the National Association of Home Builders, found other positive nuggets: The labor force expanded and hourly wages ticked up. He was at work on his own blog post on the jobs report, which he said was going to proclaim something like: “It’s lukewarm, it’s not a disaster.”