Jobs are everything to an economy. Period. Always will be.
So goes the number of jobs, so goes (in general) the demand for housing, commercial real estate and the overall performance of the economy. Naturally other factors such as taxes (or the lack-thereof), location, natural resources and external factors alter all of this, but the ultimate measure is jobs, followed by incomes.
The same is true when it comes to housing. As I have repeatedly said, there are only three types of people that do not need a job to own a home: gray haired, blued haired or bald people – retirees. Almost everyone else needs a job. Markets with strong job gains no doubt correspond with robust demand for real estate and related services.
So what states continue to outperform and which ones remain lackluster? As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market. Nor is there such a thing as equal performances across state economics.
The follow table shows the latest performance of all 50 states and the District of Columbia based on job growth for the 12-months ending November 30, 2017. Four states posted year-over-year job loses: West Virginia, Alaska, Wyoming and Connecticut. West Virginia and Wyoming are impacted by coal (Wyoming extracts more than one-half of all the coal mined in the U.S. each year). Wyoming and Alaska are impacted by cheap oil and gas, though prices have risen into the $60 per barrel range, but remain one-half the price level seen in June 2014. Connecticut is struggling with an unfavorable tax system (the Tax Foundation ranks the state as the 44th best out of the 50 states plus the District of Columbia in 2018 — see Jones on Real Estate Blog at http://blog.stewart.com/stewart/2017/11/10/state-business-tax-environment-2018-tax-foundation/ ). This no doubt helps explain the departure of General Electric’s headquarters from Connecticut to Boston.
The following table, in addition to detailing the latest 12-month job growth rate also breaks out total 12-month job gains and total number of jobs, each expressed in thousands.
A continuing surprise performer in the past four months is New Mexico, which has jumped from 35th overall as of August, rising into the top-20 in October to 24th in November. Much of the gain was oil and gas related, but renewed defense and aerospace industry spending across the U.S. are also positively impacting the state.
Job growth, which to me is the ultimate proxy for overall economic performance, bodes well for many states, is pessimistic for others, and very dynamic as far changes are concerned for yet others. Yet to be factored in is the impact on some of the high tax states given the $10,000 cap on primary mortgage interest deduction state and local taxes (SALT), which include income tax, property tax and retail sales tax.
Ted