TheMReport

TH E M REP O RT | 59 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ANALYTICS DEPARTMENT LOCAL EDITION Nuiry makes the case that there is more to unemployment than percentages, and that a hid- den actor is depressing housing market growth—and could cause more problems in the future. Nuiry cites figures from the Bureau of Labor Statistics (BLS) that reported 92 mil- lion Americans remain out of the labor force. "A whopping 920,090 people dropped out of the labor force in May, accord- ing to the data. What's alarm- ing about these numbers is that each month, nearly 1 million Americans had given up on even looking for a job, wiping out January and February gains and a bit of March's job growth too," Nuiry writes. The Bureau of Labor Statistics measures unemployment in a very specific way, with neces- sary conditions that must be met before a person is considered "unemployed." The BLS defi- nition of "unemployed" is as follows: "People are classified as unemployed if they do not have a job, have actively looked for work in the prior four weeks, and are currently available for work." The functional word from BLS is "active." Passive activities, such as cruising the Internet job boards or attending job training, don't count, leaving many people that the average person would con- sider unemployed as not "unem- ployed enough" to count towards BLS statistics. These workers—those out of the job market and not look- ing for work—are who concern Nuiry. He notes that declining unemployment figures don't point to a rebounding economy; rather, they point to workers who have given up looking, further shrinking the labor force and thus unemployment numbers. "When President Obama took office in January 2009, the labor force participation rate—the share of the population that is working or looking for work— was 66 percent. In May 2014, that number hit a record low 62.8 percent—the lowest since 1978," Nuiry writes. With fewer people working, economic ramifications ripple across the economy, especially in the housing market. The U.S. currently has 92 million men and women over the age of 16 who are not working—an all-time high. This is a sizable population who won't be pur- chasing a home any time soon. Nuiry warns, "This is an employment crisis we have not seen in 30 years. With total employment at 145.8 million, for every three Americans over the age 16 earning a paycheck there are two who aren't even looking for a job . . . . And adding 200,000 jobs a month while 1 million workers leave the job market is not a formula for healthy housing market." Study: Generation Y Key to Stronger Recovery THOSE WHO CAN HELP CARRY THE RECOVERY ARE ALREADY THE MOST HEAVILY BURDENED. MASSACHUSETTS // In its annual "State of the Nation's Housing" report, the Joint Center for Housing Studies at Harvard University suggested that participation in the housing market from the segment of the population age 18 to 34 is the key to a robust housing recovery. The report concluded that the United States housing recovery should regain its footing but also faces a number of substantial challenges. "The housing recovery is fol- lowing the path of the broader economy," said Chris Herbert, re- search director at the Joint Center for Housing Studies. "As long as the economy remains on the path of slow-but-steady improvement, housing should follow suit." The report predicts that, de- spite the challenges, the demo- graphic trends will induce greater participation. At some level at least, it's a numbers game because of the increasing volume of adults coming of age. The number of homeowners in their 30s should increase by 2.7 million over the coming decade, which should boost demand for new housing, the report predicts. For now, tight credit, elevated unemployment, and mounting student loan debt among young Americans are curbing growth and keeping Millennials and other first-time homebuyers out of the market. Young Americans, feel- ing the burden of record levels of student loan debt and falling incomes, continue to live with their parents in greater numbers. "Ultimately, the large mil- lennial generation will make their presence felt in the owner- occupied market," said Daniel McCue, research manager of the Joint Center, "just as they already have in the rental market, where demand is strong, rents are rising, construction is robust, and prop- erty values increased by double digits for the fourth consecutive year in 2013." Still, looming doubts about the economic recovery remain. In June, the Bureau of Economic Analysis released its final estimate of real gross domestic product for the first quarter of 2014. The release showed output in the U.S. declining at an annual rate of 2.9 percent. The first quarter decline stands in contrast with the fourth quarter of 2013, when real GDP grew at a 2.6-percent rate. The decline represents the greatest fall in GDP since 2009. Whether the drop in GDP represents a temporary set- back or a more dire economic situation remains to be seen. Preliminary second-quarter data shows that economic output has improved in the second quar- ter as warmer weather helped release some pent-up demand. The report also highlights the ongoing affordability challenge in the greater housing market, which is a drag on the entire population but especially taxes Millennials as they attempt to gain a foothold in new industries, often at entry-lev- el wages. Cost burdens remain near record levels and over 35 percent of Americans spend more than 30 percent of their income for housing. The report concludes that potential GSE reform, federal subsidies, and overall economic growth will be major contribut- ing factors to getting the genera- tion out of their parents' homes and give them better access to a thriving housing market. ANALYTICS

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