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TheStreet Open House

Jobs Report Casts Shadow On Housing

Stocks in this article: XHB IYR SPY DIA

NEW YORK ( TheStreet) -- The latest jobs report shows employment for young adults remains lackluster, casting a shadow on the housing recovery.

The unemployment rate for 25-34 year olds, who are usually first-time homebuyers, shot up to 7.8% from 7.5%. The national average improved to 7.3% in August from 7.4% in July.

The employment rate among young adults is 74.8%, the lowest in 12 months. The employment rate is closer to what it was during the recession, noted Trulia economist Jed Kolko via Twitter .

Before the bursting of the housing bubble in 2008, the employment rate among young adults was 78-80%.

First-time homebuyers have been missing out on the housing recovery. Tight credit is one reason why they are being locked out. A lack of jobs and stalling incomes have also weighed on confidence.

Trulia estimates that about 2.4 million households went missing since the housing bust as young adults chose to move back in with parents or other family to save on rent.

The August employment report also highlighted a lack of new jobs in the construction industry, even though the housing market has been steadily recovering.

Employment in the construction sector was unchanged in August on a seasonally adjusted basis, after declining by 3,000 in July.

But as Kolko has previously noted, construction job growth has actually outpaced national employment growth this year. The slow growth in jobs in recent months can be explained by the fact that the number of jobs per unit built at 3.4, is higher than pre-bubble averages.

Homebuilders are not building enough homes to justify hiring more construction workers. This is not so much due to a lack of confidence, but to shortages in land and materials forcing builders to keep inventories lean.

Overall, the latest employment report was not a strong signal that the housing recovery would continue over the long term. Home prices are rising amid a shortage of inventory but rising interest rates and more supply could slow gains over the coming months.

For home prices to continue to rise, household formation needs to increase and for that to happen, we need to see more employment opportunities for first-time home buyers.

-- Written by Shanthi Bharatwaj in New York.

>Contact by Email.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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