Unemployment Leads Real Estate

On today’s show we’re taking a look at how job creation is going to drive migration and ultimately affect local real estate markets.

The US recorded the lowest number of jobless claims in the pandemic in the second last week of May. This is a further sign that economic recovery is taking hold. The number of people vaccinated rose quickly in the first quarter and is slowing. Still, the number of infections and hospitalizations in the US are falling steadily and many local economies are re-opening as a result.

We have some states that have been slow to open up from the pandemic and others that have been faster on the path to economic recovery. In a recent report published in the Wall Street Journal which relies on data from Zip Recruiter, there are some states where the number of job seekers exceeds the number of job openings. Those who have lost their jobs are having a hard time looking for work. I’m thinking of states like California and Arizona. This is not a red versus blue argument. These states were very hard hit by the pandemic and they have been slow to re-open their economies. California’s unemployment rate is at 8.3% and has held pretty steady since earlier this year.

But in other states like Utah, Idaho, and Kansas the number of job openings far exceed the number of unemployed by more than 3:1. Finding qualified labor in today’s market has proven difficult in those states. The current unemployment rate in Utah is on 2.8%. A number that low would be the envy of any economy. Idaho had an unemployment rate of 3.1% at the end of April.

Fully half the states in the US have decided to end the special pandemic unemployment benefits ahead of the previously published September deadline. Many states are ending the benefits in the next 2-3 weeks.

It remains to be seen whether the labor shortage is the result of people preferring to stay home and collect unemployment benefits, as many have asserted, or whether there is truly a labor shortage in many markets.

By the end of June we will start to know the answer. As these benefits end, we will want to keep a close eye on the job metrics and how these new jobs get filled. Will the labor come from the local population, or will it be the result of migration from other parts of the country.

It’s very difficult to generalize. But some states like Utah which have strong midwestern values, I have a hard time believing that people are sitting at home collecting a government check and watching Netflix all day long.

So the real question is whether the new job creation will also create new demand for housing that is not apparent in the current real estate market metrics.

We are seeing strong migration into those midwestern mountain states. Some people are clearly moving to those states. I’ve spoken with several people over the past year who are relocating. Some are moving for work, but in fact some are moving for the lifestyle and more relaxed pace of life associated with these states.

When I look at unemployment numbers, they can be a leading indicator of housing demand.