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Will Housing Recovery Spur Job Growth? - Analyst Blog

By: Zacks.com
Posted: 1/24/2013 1:24:00 PM
Referenced Stocks: FAST;HD;LL;LOW

The labor market is not doing well and the unemployment rate is hovering around 7.8%. In such a scenario, the recovery in the housing market could, to some extent, calm the jittery economy by improving job prospects, primarily in the construction industry.

When the housing market crashed it left many jobless, but now with new construction activities and home prices showing signs of improvement, optimism prevails.

The housing market is gradually making its way out of its dormant state, thus raising hopes for a better job market. According to the data released by the U.S. Bureau of Labor Statistics, the construction industry created 30,000 jobs in Dec 2012, including 13,000 related to construction of buildings, and 12,000 for residential specialty trade contractors.

The slump in the housing market did not spare home-improvement retailers, such as Lowe's Companies Inc. ( LOW ) and The Home Depot Inc. ( HD ), which faced the brunt as homeowners refrained from spending on big remodeling projects. However, a rebound in the housing market would play a key role to instill confidence in these stocks. Other stocks to benefit include Fastenal Company ( FAST ), provider of industrial and construction supplies, and Lumber Liquidators Holdings, Inc. ( LL ), a retailer of hardwood flooring.

The sign of confidence is clearly reflected in the current hiring plans of Lowe's. The company plans to employ 45,000 seasonal workforce and 9,000 permanent part-time staff in the wake of the resurging housing market that could trigger demand for remodeling works. The metric, 'Leading Indicator of Remodeling Activity' released by Joint Center for Housing Studies of Harvard University, indicates that the spending on home improvement activities could surge in 2013.

The data suggests that spending on home improvement-related projects will witness an increase of 10.6% in the first quarter of 2013, resulting in an annualized value of $127 billion, 16.8% in the second quarter, reaching an annualized value of $134.4 billion and 19.7% in the third quarter to reach $145.5 billion. Consequently, we can expect increased hiring from home-improvement retailers to better meet the rising demand.

The elevation in home prices and the lowest mortgage rates is triggering construction activities. If the resurrection in the construction industry sustains, it will usher in good news for many job seekers.



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