Steady, but tepid, job growth has been a hallmark of the current economic recovery. Four years into the expansion, total nonfarm payrolls have grown at less than half the average pace of job gains experienced during all economic expansions of the last half century.
A lack of geographic breadth is another indication of the labor market's lukewarm recovery. A new edition of Housing Insights from Fannie Mae’s Economic & Strategic Research Group employs a “diffusion index” – a commonly used measure of the extent to which activity is spread across components of a group – to show that job growth during the current recovery has not been as dispersed across the states as in previous expansions. In addition to analyzing the geographic breadth of employment growth, the study shows that the pace of state employment gains has been muted during the current recovery. Moreover, unlike other recent expansions when state job-growth leaders were confined to a handful of regions, states with the fastest employment growth have been spread across most regions of the country during the current recovery.
By adding a geographic dimension to employment data, measures of state job growth dispersion and growth rates provide an indication of the robustness of the labor market recovery, which in turn is a key driver of healing in the housing market. Furthermore, the slowdown in state job growth rates and the geographic diffusion of the fastest-growing states might mean that regional lenders or homebuilders who focus on traditional boom areas might not receive an outsized boost from the current economic recovery. Conversely, players with nationwide scopes might be in good position to benefit from the recovery’s far-flung job growth hotspots. Similarly, uneven labor market recovery across the states suggests the benefits of housing finance mechanisms of nationwide extent.
Director, Strategic Planning
Economic & Strategic Research Group
January 9, 2014
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