Housing Recovery Lifts Other Sectors, Too

The government’s employment report for April comes out Friday. It’s an important measure of the economy’s health and the advance signals have been mixed. One report this week showed layoffs falling to a five-year low, but another suggests disappointing jobs creation.

At least one sector is providing some positive news for the job market: housing.

It was only year or so ago that housing was a big drag on the economy, and the main reason for the disappointing recovery. But that’s changed. Jim O’Sullivan, chief U.S. economist at High Frequency Economics, says right now housing is a big positive.

“There are pluses and minuses out there and it’s definitely a plus right now,” he says. “I think within the economy, it’s probably the strongest part of the economy in terms of growth right now.”

Lawrence Yun, chief economist for the National Association of Realtors, says the housing recovery is now responsible for about one-third of the economy’s growth and lots of jobs.

“Over the past year, I would say it’s probably added about 300,000 jobs from the housing sector improvement,” Yun says.

‘An Amazing Year’

Some of those jobs were added at Synergy Design and Construction in Reston, Va.

Mina Fies, the company’s chief executive officer, says 2012 “was just an amazing year for us: We grew about 40 percent in revenues. We added three people, more toward the end of 2012. And already we’re tracking for 2013 to grow another 30 percent and we’re looking to hire at least another three employees.”

But it’s not just in design and construction that the housing recovery is creating jobs. After all, those construction workers need something to get themselves and their tools to work.

A Boost For Truck Makers

Pickup sales boomed in the U.S. in April. Sales were up by double-digits at Chrysler, General Motors and Ford.

So the housing recovery is supporting job creation in the factories of Detroit’s automakers, too. Those new pick-up trucks would also come in handy in another part of the economy getting a boost from housing. Jesse Eastman owns the Fort Collins Nursery in Fort Collins, Colo.

“We’ve seen a lot of new home construction around here in the least two years,” he says. “So we’ve seen a whole lot of young couples, first-time homebuyers, young families coming in and doing all their shopping to install their own landscapes.”

Eastman says the resurrection of housing helped boost his payroll and turn a couple of his company’s former part-time jobs into permanent ones.

So auto dealerships, nurseries, furniture stores and many more businesses get positive knock-on effects from the healthier housing market.

Consumers ‘Feeling More Comfortable’

Economist Lawrence Yun says there’s another, even broader benefit from the rise in home prices, which are up on average over 9 percent in the past 12 months. Consumers are feeling wealthier and more confident.

“You have more families feeling more comfortable, given the rise in housing wealth, that’s just general spending into the economy,” Yun says. “It’s also helping to lift the employment in the retail sector and other segments of the economy.”

Economist Jim O’Sullivan sees that wealth effect just kicking in. He says housing could contribute a lot to growth and employment for the next couple of years. But while its direct and indirect effects are contributing significantly to economic growth right now, he says there are other powerful forces holding the economy back — like Washington’s budget cuts.

“Arguably at this point, fiscal policy’s taking a good [percentage] point and a half out of growth, and so I would say housing is up less than enough to fully offset that,” O’Sullivan says.

And that may not bode well for April’s jobs numbers out Friday.

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