Let’s talk about jobs for a minute. Not the iPod selling, Pixar-owning kind, but the working for a living kind. I’m going to keep this really basic. Jobs make people money. People use money to buy things. One thing that people buy is houses. Therefore, in my opinion, one good indicator of what the housing market is likely to do is what is happening with jobs. Are people in our area making enough money to buy the houses in our area? Are there enough jobs for everyone in our area, or are there not enough? Or perhaps there are more jobs than there are qualified people, so new people are being brought in. Depending on what specific segment of the market you look at, many of these may be true.
What I believe is most useful is to look at overall trends. Incidentally, there happened to be an article about that very topic in this morning’s Seattle Times.
Washington added jobs last month, but at a slowing pace, while the increased number of people entering the labor market nudged up the unemployment rate.
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So far this year, each month since February has seen fewer jobs added than the month before.
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Despite the slowing pace, job growth continues to run ahead of predictions.
Okay, so our general jobs picture looks pretty good, although the rate of improvement is slowing. So which specific industries are responsible for the most new jobs?
Driven by a sizzling housing market and a resurgence in commercial real estate, the construction industry added 1,100 jobs last month and has grown by 20,000 jobs, or 11.4 percent, over the past year.
In addition, the real-estate sector of the financial-services industry added 800 jobs last month and 1,600 over the past year.
Professional and business services, a motley category that includes everything from architecture to waste disposal, added the most new jobs in April, 1,700.
Aerospace added 400 jobs last month.
It has grown by 6,700 jobs, or 10.3 percent, over the past year.
The strength of the real-estate and aerospace industries particularly benefited the Puget Sound region.
What do you know… construction and real estate are among the leading sources of new jobs, together accounting for 21,600 new jobs in just the past year. Interestingly, while "aerospace" is probably mostly Boeing, one thing I did not see in this article was any mention of the darling of the real estate cheerleaders—Microsoft. Didn’t we just see an article yesterday about a humongous Microsoft expansion? Aren’t they bringing thousands of high-paying jobs to our area every year? Well, not quite. While the headline shouted Microsoft plans big expansion, the article tells [insert Paul Harvey voice here] the rest of the story.
Overall, Microsoft said in February that it would spend $1 billion to add room for 12,000 employees in 3.1 million square feet of additional space over the next three years. That plan includes the space at Lincoln Square, company spokesman Lou Gellos said Monday. But not all of the space is slated for new hires. Part of the goal is to alleviate overcrowding, Gellos said.
The Lincoln Square lease will also address the fact that Microsoft’s sales team is spread across a number of buildings, Gellos said.
"This is really an effort to consolidate and get the whole sales group together in one spot," he said.
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Microsoft isn’t altering its employment projections for the current fiscal year, which ends June 30, Gellos said. The company, which employed 61,000 people as of June 2005, has said it expects to add a total of 4,000 to 5,000 employees worldwide this year, 40 percent of them in the United States, and most of those in the Puget Sound region.That would be in line with the steady but relatively slow growth that Microsoft has experienced since the 2000 tech bust.
Let’s see, 40% of 4,500 is 1,800 new MS jobs in the USA. "Most" could mean as low as 51%, but I’ll be generous and assume that 75% of those jobs will be in the Puget Sound. 75% of 1,800 makes a whopping 1,350 new jobs that Microsoft is predicting they will bring to our area in the coming year.
Hey, 1,350 is almost enough to balance out the 1,600 real estate jobs that were created in the last year. Hmm, but what about the 20,000 construction jobs? "But wait," you say. Microsoft hires highly paid professionals. Surely 1 job at Microsoft is the economic equivalent of at least half a dozen construction jobs, right? Well, maybe not quite.
Base compensation has become a bigger issue since the value of Microsoft options fell with its stock. In 2003, the company phased out options and began using smaller stock awards to supplement salaries, ending the era of the fabled Microsoft Millionaire.
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[Internal Microsoft pay documents] indicate that in Microsoft’s current fiscal year ending June 30, the company budgeted for average merit increases of 3.2 percent for workers in technical positions. It also budgeted for a 1.7 percent rise in promotion-related compensation.Also disclosed are salary ranges for technical jobs, not including sales and service-related positions. The salaries range from a minimum $25,500 up to a maximum $285,000.
So here’s my thesis: Jobs (at least partly) drive housing. The job situation in Washington (and the Seattle area) has been doing pretty well lately. However, a large amount of the job growth has been in housing-related industry. Therefore, when housing slows due to other forces (such as increasing interest rates or higher lending standards), the job market will slow, thus causing housing to slow further. Lastly, high tech jobs—including Microsoft—are not growing at a fast enough rate to rescue us when/if construction and real estate experience a significant slowdown.
Your thoughts?
(Drew DeSilver, Seattle Times, 05.17.2006)
(Todd Bishop, Seattle P-I, 05.16.2006)
(Brier Dudley, Seattle Times, 03.09.2006)