It looks like the housing bust may have finally caught up to us up here in the Northwest. According to the latest data from the Employment Security Department, unemployment in the Seattle metro area jumped 7/10 of a point last month alone. Here’s an excerpt from the Seattle Times:
Unemployment in Washington state took its biggest jump in nearly 28 years last month, as employers cut payroll jobs for the third straight month.
The unemployment rate rose to 5.3 percent in May from 4.7 percent in April, after adjusting for seasonal variations, according to the state Employment Security Department. In the Seattle metro area, unemployment leapt seven-tenths of a percentage point last month, to 4.1 percent.
…
“This report may skewer the notion that Washington is immune to the downturn,” said Bill Conerly, an economist and business consultant in Portland. “The state has done better than the nation for a number of reasons, but immune — no.”
Dang. I guess everybody must have ignored Gregoire’s advice and bought into the self-fulfilling dire talk. We should have tried to believe harder.
The P-I also has a story on the spike.
The primary reason for the job numbers is the housing slowdown, which has turned the booming industry of construction into a lagging one and spills into other areas of the economy. Year-over-year construction employment fell in May, particularly in the residential sector. Financial services jobs are also taking a hit.
It sounds like they’re saying that the argument that a strong economy will prop up the housing market is backward, and in fact the housing market was propping up the economy. I believe that we have been warning of that since 2006:
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.
That sounds like exactly what’s happening right now. And before someone breaks out the “stopped clock” nonsense, note that in 2006 we didn’t say “the slowdown will happen this year,” we just warned that the economy was propped up on housing, and when housing slowed down, the economy would too.
As an added bonus, here’s one more local take on the spike.
Major cutbacks in the building industry in Snohomish County are blamed for a sharp increase in unemployment in May, the state Employment Security Department reported Tuesday.
Local unemployment increased from 3.6 percent in April to 4.6 percent last month.
“We dodged a bullet for quite a while,” said Donna Thompson, a regional labor economist with the department. “But unfortunately, it’s catching up with us.”
Thompson was talking about the national housing crisis.
Thompson said the local construction industry is doing poorly because of the slowdown in home sales. “There are a high number of homes that haven’t sold and are still in the market,” she said, noting that those homes need to be cleared out before builders can start on new ones.
Last month, the county lost 300 construction jobs. During the past year, it’s lost 3,300. “Construction workers are losing their jobs and it’s really having an effect,” Thompson said.
It sucks, but it’s not like we can say it comes as a surprise.
(Drew DeSilver, Seattle Times, 06.18.2008)
(Andrew James, Seattle P-I, 06.17.2008)
(Tim Ellis, Seattle Bubble, 05.17.2006)
(Mike Benbow, Everett Herald, 06.18.2008)