A Normal Job Recovery, Brought to You by Housing

According to one estimate, one new house equals three new jobs.

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New homes mean new jobs, and not just in construction.

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The recovery from the Great Recession has been unusually long, unusually painful, and unusually skimpy on the jobs. But new hints of improvement in housing may herald a return to the usual: a recovery in which people are actually going back to work.

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On Tuesday, financial information company CoreLogic reported that home prices rose in June, up 1.3 percent from May and 2.5 percent from one year ago. Likewise, June housing starts were at their highest point in nearly four years, according to the latest government figures. That may point to an economic rebound that finally looks a little more like a typical economic rebound.

"Based on the very recent past, it's looking as if housing is assuming its historical normal role of leading a recovery," says Paul Emrath, vice president of survey and housing research at the National Association of Home Builders.

In the current, excruciatingly slow recovery, it has become common to hear that housing growth leads to job growth, but it's more than a nebulous economic maxim. According to 2008 estimates from the National Association of Home Builders, building one new single-family home yields 3.05 jobs, compared to the 1.16 jobs created for each rental unit. As people become more able to plunk down the money for a new home, that could mean an acceleration in hiring.

The immediate effects would likely be seen in the construction industry, which lost nearly 2.3 million jobs during the crisis. Recently, that industry has shown small signs of improvement, with an unemployment rate down from 13.6 percent in July 2011 to 12.3 percent as of July 2012—still high, but a sign of relief.

However, the job-creation ripples from building a new house extend beyond people nailing two-by-fours into place.

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According to NAHB calculations, around half of the 3.05 jobs supported by building a single-family home are in construction. The rest come in the industries involved in making and selling the building materials, and even the house itself: manufacturing, wholesale and retail, finance, and real estate.

Those job boosts would certainly be welcome right now, when a slightly stronger housing market and a softening job market seem to have diverged from each other.

"Prior to this very recent experience, if you go back in 2011 and 2010, the housing statistics were pretty much moving in tandem with the employment statistics. When it looked like they both were getting better they were both getting better together," says Emrath.

It is encouraging to think that housing may finally play the leading role in this recovery that it has in past recoveries. But that relief isn't coming next month, and may not even come in the next six months.

"I do expect that housing activity is beginning to turn around and be a growth driver, probably next year," says Celia Chen, a senior director of the research staff at Moody's Analytics. As for this year, she says she expects homes to add only a small boost to GDP growth—around 0.3 percentage points.

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The housing hole that the nation will have to climb out of is simply so large that recovery will continue to be a long slog. Emrath points to the mid-2000s, when for a time more than 1.5 million new single-family homes were built per year. Now, there have been fewer than half a million for three years.

If 1 million homes equals more than 3 million jobs, that's a fantastic amount of job growth lost. But there is hope that as inventories finally start to shrink and pent-up demand finally accelerates the housing market, job growth might accelerate even faster.

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via E-mail at dkurtzleben@usnews.com.