Last week, the Labor Department reported a larger than expected increase in U.S. non-farm employment which sparked optimism that the job market continues to slowly improve.  This was the third straight month that the economy has added a significant number of jobs despite continued losses in the public sector due to budget shortfalls.  But not all areas are experiencing improvement in the labor market equally.  A couple of weeks back, the Labor Department released metro area jobs data for March, so for this week’s data feature, courtesy of "HIP" (Housing IntelligencePro), we look at just how jobs are corresponding with new home prices.

The Labor Department reported that the top-three performing large (population of 750,000 or more) metropolitan areas in terms of year-over-year percentage increases in employment were Milwaukee, WI (+2.8%), Dallas, TX (+2.4%), and Houston, TX (+2.1%) while the bottom-three worst performing large regions were Sacramento, CA (-1.8%), Baltimore, MD (-0.4%), and Atlanta, GA (-0.2%).  According to data from HIP, median new home prices in Milwaukee surged 39% in the March year-over-year period while prices in Dallas and Houston increased 19.6% and 13.2%, respectively; so one could say jobs and housing are joined at the hip, with jobs leading the way.   It comes as little surprise that the bottom-three performing regions in terms of employment all recorded declines in their median new home prices from year-ago levels.  Median new home prices fell 6.3% from last March in Sacramento while declining 5.2% in Baltimore and 3.8% in Atlanta.  Regions that are creating jobs and keeping steady employment are seeing the positive results spill over into the local housing market which is why it is important for labor market conditions to continue to improve.

Mortgage rates continued their decline this week falling to their lowest levels since December.  This was the fourth straight week that the average fixed-rate on a 30-year mortgage has declined.  Lower mortgage rates are coming at a welcome time as spring home-buying season starts to kick into full gear.  An improving economic climate along with lower rates should help kick-start housing activity in the months ahead.

Friday the 13th was unlucky for equities as the broader market sold off due to falling commodity prices, the strengthening dollar, and continued economic uncertainty.  Near the end of today’s trading session, the broader S&P 500 index was down 0.9% for the day and on pace to finish trading down a little over 0.2% for the week.  Inflation data released this morning showed consumer prices rising at their fastest annual rate since October 2008 due to high energy and transportation costs.  Hopefully the recent pullback in crude prices will alleviate some of price increases going forward if they can remain subdued.

The Economy
Preliminary University of Michigan/Reuters consumer sentiment data was more optimistic in May.  The index increased to a reading of 72.4 from a reading of 69.8 in April.  It is the highest the index has been in three months.

The consumer price index continued to rise in April due to increases in energy and transportation prices.  The consumer price index increased 0.4% in April on a seasonally-adjusted basis while core consumer prices posted a 0.2% gain.  Headline CPI increased 3.2% from a year ago while core CPI increased 1.3% year-over-year in April.  This is the largest annual increase for any month in headline consumer prices since October 2008 and the largest annual increase in core consumer prices in any month since February 2010.

After experiencing significant increases over the past couple of weeks, filings for initial unemployment claims eased in this past week.  First-time unemployment claims dropped by 44,000 to a seasonally-adjusted 434,000 in the week ended May 7th from an upwardly revised figure of 478,000 last week.  This is the fifth straight week that initial jobless claims have remained above the 400,000 level.  Despite a relatively positive employment report last week, the recent rise in first-time jobless claims increases the risk of further instability in the U.S. labor market.

The U.S. economy added 244,000 payrolls in April on a seasonally-adjusted basis.  This is the third straight month that the economy has added at least 200,000 jobs which is a sign that labor market conditions are continuing to improve.  The economy has now added jobs for seven straight months.  Job growth in April was the strongest in any month since May of last year.  Strength in private sector hiring fueled job growth last month while government payrolls continued to decline as local governments battled budget shortfalls.

Despite the employment gains in April, the U.S. unemployment rate increased to 9.0% from 8.8% in March.  This is the first time the unemployment rate has increased since November.  The unemployment rate increased due to a jump in the labor force as more people are returning to look for work.

Housing Market
National average mortgage declined from the previous week to 4.63% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on May 12th.  This is the fourth consecutive week that rates have declined.  Rates are now back to their lowest levels since December.  The 30-year fixed-rate mortgage has still averaged below 5.0% for 12 consecutive weeks.

In the week ending May 6th, the MBA’s seasonally-adjusted purchase index increased 6.68% from the previous week but was down 26.06% compared to the same time last year.  This is the second straight week that the purchase index has increased.

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