A message from RE/MAX Connection CEO Christopher J. Brown:
“As the housing market continues to make strides, the employment rate in New Jersey will improve and home sales and construction will lead the way in 2013. You can’t have meaningful job creation without the housing market and this most recent economic report illustrates that marriage.”
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Naroff Economic Advisors, Inc.
Joel L. Naroff
President and Chief Economist
INDICATOR: December Housing Starts and Permits/Weekly Jobless Claims
KEY DATA: Starts: +12.1%; 1-Family: +8.1%; Permits: +0.3%; 1-Family: +1.8%/ Jobless Claims: 335,000 (down 37,000)
IN A NUTSHELL: “The housing sector has moved to the head of the class, helping generate more growth that is firming up the labor market.”
WHAT IT MEANS: That massive economic slowdown that most had been predicting for the last quarter of 2012 does not look to have occurred. We have already seen that retail sales were better than expected and now it is clear that residential construction really picked up. Housing starts soared in December to its highest level since June 2008. For all of 2012, new construction of all types of units rose an incredible 28% with single-family activity up over 24% and multi-family rising 37%. The gains in December were broad based with only the South posting a single-digit rise. For all of 2012, only in the Northeast were increases less than 27.5%. But with Sandy destroying so many homes, I suspect that part of the nation will lead the way in 2013. Looking forward, permit requests rose modestly and were lower than actual starts. That points to a small pull back in construction early this year. Any softening in construction is not likely to be large or long-lasting because the number of units that have permits already requested but not started continues to grow.
The strength in the housing market may be starting to have an impact on the labor market. Jobless claims plummeted last week. Yes, these data are awfully volatile and I suspect a jump in next week’s number, but the trend is still down. The two week and four week averages have come down below 360,000 and that points to improving job gains and a further slowing in layoffs.
MARKETS AND FED POLICY IMPLICATIONS: Both the housing starts and jobless claims numbers are examples of why we should not focus simply on just one data point. The starts may have been boosted by unseasonably warm weather while the claims drop may just be a quirk of the hiring/firing pattern in the post-holiday period. In addition, some firms may have reduced their workforces prior to the end of the year in order to protect against a possible fiscal cliff disaster. Who knows? But while the changes may have been outsized, the trends make sense. Despite the fears of the cliff, every sector related to the consumer, retailing, vehicles and housing, did well in December. That tells me the economy posted decent growth in the fourth quarter with only the paranoid business community following up on their fears. Indeed, with the absurd debt ceiling cliff hanging over CEOs heads, they will probably do little investing in the first quarter as well. But once we clear that hurdle – I continue to believe Members of Congress are not totally irrational – business spending, hiring and confidence will all jump. That sets us up for a better spring and a potentially strong second half of this year, even in the face of tax increases and spending cuts.
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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
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RE/MAX Connection Realtors, 1000 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com
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