“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.
Buzz: Rising mortgage rates are taking a toll on workers at Southern California’s real estate-related businesses.
Source: My trusty spreadsheet, filled with August state job figures, looked at hiring habits in construction, real estate and finance business in Los Angeles, Orange, Riverside and San Bernardino counties.
Topline
Local property-related businesses overall added 600 jobs for the month and 14,900 more workers in 12 months, or 2.3% growth. That’s a brisk year’s hiring rebound from 2020 pandemic lockdowns — nearly triple the average annual employment growth of 0.82% since 1990.
However, August’s hiring pace at these businesses was slow compared with 1,240 workers added monthly on average in the past year. And local bosses added workers at a 1,140 monthly pace in 2018-19 before we knew anything of coronavirus.
The details
There’s a bigger “but” in the numbers.
A building boom — both for housing and infrastructure projects — keeps construction workers busy though the overall hiring pace cools. The region had 381,600 workers building things after adding 1,800 in a month and growing by 17,700 in a year. Recovery hiring since 2020’s coronavirus economic chill averaged 2,260 a month.
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But workers handling real estate transactions haven’t fared as well. Soaring mortgage rates of 2022 slashed homebuying to Great Recession levels. Those rates also dried up the ability of homeowners to refinance mortgages. Higher financing costs cut lucrative business for real estate salespeople and lenders alike.
So, employment at real estate and finance firms dropped 1,200 to 293,600 in August — down 2,800 in a year. That’s a sharp reversal from hiring that averaged 400 a month in the pandemic era’s jobs rebound.
Another view
Let’s ponder employment this summer compared with before the pandemic era.
August employment for all Southern California property-related businesses was exactly back to where it was before coronavirus hit. But it’s a split picture: Construction was 3% above February 2020 levels vs. 4% below real estate and finance firms.
Compare those patterns to August employment at other key Southern California employment niches vs. February 2020 Industries above pre-pandemic staffing include transportation/warehousing (20% higher), healthcare and social services plus business services (up 3%); and retail trade (up 1%). Industries still playing catch-up: restaurants (off 1%), manufacturing (off 3%), recreation (off 8%), and hotel (off 20%).
Regions inside the region
Hiring also varied in construction, real estate and finance, geographically speaking, in August …
Los Angeles County: A slight cooling with 324,800 workers after adding 400 in a month and growing by 7,900 in a year. Recovery hiring has averaged 1,176 a month to bring the L.A. job count to 99% of February 2020.
Orange County: Still toasty with 199,400 workers after adding 900 in a month and growing by 2,800 in a year. Recovery hiring has averaged 610 a month bringing O.C. jobs to 99% of pre-pandemic days.
Inland Empire: The boom in Riverside and San Bernardino counties stopped in August with a drop of 700 workers. Still, the 151,000 workers are up 4,200 in a year. Recovery hiring has averaged 869 a month bringing I.E. jobs to 105% of February 2020.
How bubbly?
On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … THREE BUBBLES!
Workers at real estate and finance firms are early victims of the Federal Reserve’s quest to tamper inflation rates at 40-year highs. Folks working residential construction sites could be next.
This rapidly changing market for workers at property-related businesses is one example of how higher interest rates could create a slower but more sustainable pace for the broad economy — and real estate specifically.
Please note that property-related workers equaled 8.6% of all Southern California jobs in August — far off 2006’s record high of 10.6% in the last bubble era. Will significant job cuts outside of the real estate game be needed to cure 2022’s inflation ailments?
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
Source: Orange County Register
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