Four States Hit Hardest By Housing Now Lead U.S. Jobs RecoverySteve Matthews
Arizona, California, Florida and Nevada -- the states that were most hurt in the real estate collapse over the past five years -- are now leading the U.S. labor market expansion.
The four states added 222,100 jobs from August through December, accounting for 28 percent of the increase in U.S. employment in that period, according to Labor Department figures. Their outperformance may continue, say economists at Moody’s Analytics Inc. and IHS Global Insight.
Households in the “sand states,” whose homes have lost on average half of their value since the 2006 peak in the housing bubble, are healing after cutting debt and bolstering their net worth, said Jan Hatzius, chief economist at Goldman Sachs Group Inc., yesterday in an interview in New York. Their stabilization may signal a broader improvement by U.S. consumers that supports a faster expansion in employment growth.
“There has been a whole lot of balance sheet improvement,” said James Paulsen, who helps oversee more than $330 billion as chief investment strategist in Minneapolis for Wells Capital Management. “Even the places that were ground zero for the 2008 financial crisis are coming back to life. Things are starting to pop a little again.”
Voters’ perception of improving local economies would benefit President Barack Obama’s re-election campaign, said Kathleen Hall Jamieson, a communication professor at the University of Pennsylvania’s Annenberg School for Communication in Philadelphia. “The underlying question is how does this feel in the community where you live,” she said.
Gains in computer systems design, food services and drinking establishments, and manufacturing contributed to a 227,000 increase in U.S. payrolls in February, Labor Department figures showed yesterday. Job growth over the last six months was the strongest since 2006. The jobless rate held at 8.3 percent.
The broadening national recovery is helping local industries, including gambling in Nevada, tourism in Florida and Arizona, and social networking in California.
“The states that were most affected by the bursting of the housing bubble -- California, Florida, Nevada, Arizona -- have started to do better than the national average,” Hatzius said in an interview on Bloomberg Television’s “InsideTrack” with Erik Schatzker. “There has been a shift. I think it says the balance sheet damage that was really responsible for the weakness is really beginning to be repaired.”
Ramar Way says he had a six-month-old and four other children under 10 when he started collecting unemployment benefits two years ago in Florida, where the maximum weekly check is $275, fifth-lowest among U.S. states, according to the National Employment Law Project.
In January, he was hired to run a front-end loader as part of a Port of Miami expansion project, making $18.62 an hour. “I’m so happy,” Way, 39, said in an interview. “This really helps me out.”
While the four states all have higher unemployment than the U.S. average, they will make quicker progress in reducing it this year, forecasts Moody’s Analytics Inc. in West Chester, Pennsylvania. California may drop to 9.8 percent from 11.2 percent in December, Florida to 8.9 percent from 9.9 percent, Nevada to 12.5 percent from 13 percent and Arizona to 8.5 percent from 9 percent, according to Moody’s. The national jobless rate is forecast to be 8.2 percent at year’s end, Moody’s said.
Florida and Nevada are both swing states in the presidential campaign, and Nevada is also a critical contest in the struggle for control of the Senate. Obama campaign officials are targeting Arizona, which has a growing Hispanic population sympathetic to Democrats.
Florida, with its 29 electoral votes accounting for more than a tenth of the 270 needed to win the presidency, has swung between Republicans and Democrats to side with the winning candidate in the past four presidential elections. Nevada, which Obama narrowly carried in 2008, has supported the winner in every election since 1976. The Senate election in Nevada is one of 10 in the country rated a “toss-up” by the nonpartisan Cook Political Report.
Household wealth in the U.S. climbed from October through December for the first time in three quarters, the Federal Reserve said March 8. Household debt rose at a 0.3 percent annual rate last quarter, the first increase in more than three years, the report showed. Consumers’ ratio of debt payments to disposable income in the third quarter was the lowest since 1994, a separate Fed report found.
Price declines have reduced net worth of homeowners in states where housing boomed from 2002 to 2006. The states with the largest average home price declines from their peaks to January 2012 have been Nevada, 60 percent; Arizona, 51 percent; Florida, 49 percent; and California, 44 percent, according to CoreLogic, a provider of real estate information.
While home prices have continued to fall, residential investment, including homebuilding as well as renovations, contributed to U.S. economic growth in the fourth quarter, government figures show. It subtracted from growth from 2006 to 2011.
“Housing is no longer a drag on the economy and is turning into a slight positive,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. California is gaining from “the social networking boom and growth in smart-phones and tablet PCs,” while in Florida, “tourism has been exceptionally strong.”
Tech Companies Expanding
Technology companies are scooping up commercial real estate in the Financial District and South of Market areas of San Francisco to accommodate their expanding workforce. LinkedIn Corp., the biggest professional-networking website, Salesforce.com Inc., the largest maker of online customer-management software and Macys.com, the retailer’s e-commerce division, were among technology companies that leased more than 1 million square feet of office space in the city in January and February, according to a press release from Mayor Edwin Lee’s office.
“It is a complete war for talent every single day,” Mike Guerchon, senior vice president of global employee services at Riverbed Technology Inc., the San Francisco-based maker of computer-networking products, said in a March 8 telephone interview. “What our recruiters tell me is that every engineer that we’re talking to has three or four other offers from other companies.”
Skilled workers are also in demand in Florida, where the unemployment rate has declined from a year earlier.
“We’re getting encouraging indicators that the job market is starting to open up,” said Bennett Mazor, 47, a staffing consultant for TransHire, a Fort Lauderdale-based recruiter. The company finds engineers, web designers and other workers for a range of companies including banks, manufacturers and others in the travel industry.
Las Vegas Strip casino gambling revenue rose 3.6 percent in December, bringing the full-year gain to 5.1 percent for a second annual increase as a recovery in the biggest U.S. betting city strengthened.
“The bulk of the strength in Nevada has come from leisure and hospitality,” said Daniel White, a Moody’s economist. “As the national recovery improves, more vacationers are returning and spending money in Vegas.”
That’s helping Heather Parks, who said her information-technology consultancy, Healliam Inc., is having to turn away customers now after weathering a “huge dry spell” last summer. Most of her customers are casinos, and her business, which she founded in 2010, has benefited from the trend of outsourcing technology work, she said by telephone
Arizona started to outpace the U.S. economy in last year’s second half, said Daniel Culbertson, a Moody’s economist. “Healthcare, education, and professional services have been particularly strong,” he said.
Isaiah Lopez, 28, says he lost his job in May at Wells Fargo & Co.’s unit that processed second mortgages. He said he sent out 500 resumes over six months and had about 50 interviews until he was picked up by a staffing company and placed at American Express Co. at the end of October on a one-year contract without any benefits.
As a single father of three with $100,000 in student loan debt for his undergraduate and MBA degrees, Lopez said he was willing to take any job that came his way. “I needed to get a job just to sustain myself and my kids,” he said.
Larry Storjohann, 54, the corporate general manager at Earnhardt Auto Group in Chandler, Arizona, said his company didn’t hire anyone at its dealerships for almost two years from November 2007 to November 2009. Automotive sales have started to improve, with the company’s sales growing 10 percent from 2010 to 2011. The company has hired 30-40 new employees recently at its 16 stores.
“We’ve hired sales people,” he said. “We’ve hired support staff. We’ve hired staff in the detail areas. We are hiring and it seems like, knock on wood, the economy is continuing to inch up.”
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