Back in the office after a week away and just wanted to give a few quick takes on recent figures.
Quick Take 1: June Jobs
Whoa. 4,300 lost jobs in June? Is the recovery, as weak as it has been, over? Fortunately, as Mark said in The Oregonian article, “The truth is, unfortunately, a little more boring.” First, withholdings out of Oregonians’ paychecks continue to grow solidly, indicating steady job growth and the state’s coincident indicators are all improving. So this is highly unlikely the first step toward the next recession, but that does not mean job growth didn’t slow or that there were even some job losses. However, the magnitude of the job losses is, well, interesting. Check out this table. In June of last year, Oregon added 5,800 jobs from May to June on a not seasonally adjusted basis, which translated into small job losses on a seasonally adjusted basis. From May to June of this year, the state added 9,600 jobs over the month (two-thirds are many), but the state lost 4,300 jobs? Hmm…
You can chalk this up to the seasonal factor, which one uses to convert the monthly changes into seasonally adjusted changes based on the normal fluctuations — trying to extract the signal from the noise. Like Mark said, boring stuff. Here are the June seasonal factors for each year since 1990. Two things stand out. First 2013 seasonal factors were higher than recent years (thus helping prop up the seasonally adjusted changes a year ago). Second the 2014 seasonal factors appear to be quite low, thus helping to deflate the seasonally adjusted changes today.
So what’s the truth? Hard to say exactly at this point, but so far, based on just one interesting data point, there are no broad worries about the recovery continuing. If one applies seasonal factors more in-line with historical values, then the state’s employment was likely flat over the month. Not great news, but better, and as The Oregonian‘s headline says, the recovery is far from complete and that is true.
Quick Take 2: Housing and Construction
Construction bore the brunt of the preliminary job losses in June and even after adjusting the seasonal factor to something more in-line with historical figures, the industry likely did lose jobs (just not as many). The ratio of construction workers to housing starts is still elevated (see here). The relative strength shown in the ratio likely has to do with nonresidential construction projects like the second phase of the Intel expansion, office building renovations, MAX construction and the like. Housing starts are relatively flat, but if one or more of these larger nonresidential projects winds down, then there could be weakness in the employment figures.
Speaking of housing and the latest RMLS report, here is a quick update on housing affordability. If one is able to save up and put a large down payment into the loan, the market – even with strong home price appreciation – is still affordable, if you can find a home with the limited supply. However, with just a small down payment (thus paying mortgage insurance and a larger loan balance), the median home in the Portland MSA is at the very high end of affordability relative to median family income. The record levels of affordability seen just two years ago are gone, with strong price gains and higher interest rates, but in the bigger picture, affordability is back to the levels seen in the late 1990s.
Quick Take 3: Poverty Hot Spots
The U.S. Census Bureau recently put out a report on high poverty areas across the country. As written about in The Oregonian, Oregon saw a large increase in such areas from 2000 to 2010. While the Census report provides a high level look at this issue across all the states, I just wanted to highlight some great work that Oregon’s Department of Human Services did last year on the same topic. You can see the report here: High Poverty Hotspots. One can scroll each county in the state and see details regarding some of the local socioeconomic characteristics of these hotspot areas along with SNAP and other DHS/OHA service data. The DHS report does a really good job of detailing these changes and highlighting the areas of the state that are experiencing high poverty levels.