While the March jobs report delivered disappointing numbers, the strength in construction employment offers encouragement, Freddie Mac explained in its economic and housing outlook report for April.
In March, the economy added just 88,000 jobs, while the unemployment rate remained stubbornly high at 7.6 percent. Adding to the dismal report is the fact that the decline in the unemployment rate was largely driven by a decrease in labor force participation, not employment growth, the GSE noted.
However, construction jobs have been “accelerating” in recent months, with net construction job growth representing 15 percent of all job gains over the last six months, the report stated.
“Until aggregate unemployment decreases substantially we will not experience robust growth. Construction employment is showing signs of life, which should help to improve the overall macroeconomic picture,” said Frank Nothaft, Freddie Mac VP and chief economist.
The latest report on housing starts showed starts were up 47 percent year-over-year in March, pointing to further growth in construction employment. Starts also rose above the 1 million mark for the first time since June 2008.
Adding to that are record low mortgage rates, which are expected to reinforce the growth in starts.
“Supported by low mortgage rates we expect more homes to be built in 2013 than in any year since 2007. This increased construction employment should continue to help bring down the overall unemployment rate,” Nothaft added.
Low mortgage rates also support a forecast for stronger originations. Freddie Mac projects residential originations, including single-family and apartments, to be nearly $2 trillion in 2013. Refinances are expected to increase by $100 billion in 2014 as a result of the extension of the Home Affordable Refinance Program to 2015.