Last week’s jobs report along with this week’s jobless claims prove that weather played a role in the slowdown during the winter months.At the time, January and December’s weak employment reports did not suggest that weather played a signficant role but employment has picked up noticeably over the past couple of months as the weather has steadily improved.Job growth in February and March were in-line with the monthly average last year and private employers have hired back all the jobs they shed during the 2007-09 recession.
Now that the first quarter has come and gone and the brutal winter weather is behind us, we expect to see a surge in economic and housing activity.Weather definitely played a role in the winter slowdown since people were not out spending money, shopping for homes, or even looking for work during those winter storms.Let’s take a look a look at the winter that was:
It has been a harsh winter. According to data from Accuweather, annual snowfall this winter was more than double its historical average in Chicago, Charlotte, Detroit, New York City, Indianapolis, and Washington, D.C.; it was more than triple in Philadelphia. It was one of the coldest winters on record for the U.S. as a whole. Weather surely played a role in slower housing activity over the past few months.
Single-family permit activity is up in most of the major metro areas. As you can see in the chart below, single-family permit activity is still up year-over-year for the majority of the major metro areas across the country. Healthy markets in NC and TX continue to surge higher. The jump in SF permits for New York City is a little misleading since MF development dominates that market (accounting for almost 70% of overall activity) and that is down over 8% so far this year. Weather likely played a role in slower activity for Philadelphia and Washington, D.C.
E/P ratio is declining. According to data from Zonda, the E/P ratio for the U.S. fell to a reading of 2.03 in February which is down from 2.49 in the previous month. It is the lowest reading recorded since May 2011. This is because permits are still increasing due to strength in the multi-family segment while job growth has slowed.
Jobs are back. Private employers have already hired back all the jobs that they shed during the 2007-09 recession. The economy has added 8.9 million private jobs versus 8.8 million jobs lost. The economy has consistently added jobs for almost four years and employment should pick up even more as we enter into the spring and summer months and the weather improves.
Slower sales. Both new and existing home sales slowed in February. New home sales are the weakest they have been since September while existing home sales fell to their slowest pace since July 2012. At least some of that weakness had to be caused by the inclement weather. The Fed taper which has caused rates to steadily rise and higher home prices which has hurt affordability are some other factors that may be negatively impacting sales.
So what does this all mean? Well, one telling sign is that job growth has picked up as the weather has improved. The economy added 192,000 payrolls in March while the unemployment rate remained unchanged at 6.7% with an expanding labor force. If the past couple of months were any indication at all, then we should continue to see solid job growth in the spring and summer months. A stronger labor market will continue to fuel demand in the housing market. With the weather clearing up, expect to see a lot of pent up demand as we head into the spring home buying season.