Improving Labor Market Boosts Detroit Housing

South East Michigan saw an average 5.9 percent unemployment rate in 2015Q2. While still above the national average, this indicates a relatively healthy labor market for the region. Although the labor force has contracted over the past year, job creation in the area remains positive, forcing unemployment down at a faster clip. Total nonfarm employment growth in Detroit registered at 2.5 percent for the year ending in July, falling in line with its summer trend. Total year-over-year employment has increased in the region consistently since May 2010, albeit at a moderate pace. The region is seeing strong employment growth in construction, as tight labor markets are boosting demand for real estate. Manufacturing employment growth has generally led other sectors, but this will pivot to the service industries in the region. The financial activities, professional/business services, and education/healthcare sectors have experienced accelerating growth this year.

Real estate in South East Michigan had a hot summer. Single-family housing starts in Detroit reported their highest number in nine years this July, and multi-family housing starts were at their highest in a decade in June. Price levels have grown consistently for four years, and the quarterly year-over-year improvement has bested the national average during that time. Even commercial real estate markets are tightening, as DBusiness reports industrial space vacancy to be at historic lows. Companies are continuing to acquire buildings downtown, like the Hemmeter Building and Book Tower.

Ford announced in July that manufacture of some of its smaller vehicles would be relocated abroad by 2018. Fiat Chrysler followed with a similar announcement, to transfer smaller vehicle production south of the border. We expect manufacturing employment in the region to level out.

SEMI_09_2015

Click here for the complete South East Michigan Regional Economic Update:  SEMI_2015_Q3.

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