U.S. Economy Adds 217,000 Jobs in May; Negative Equity Keeps Dropping; Household Net Worth Continues Rising

The economy added a net of 217,000 jobs in May. More than 300,000 U.S. homes returned to positive equity in the first quarter of 2014. U.S. household net worth increased in the first quarter of 2014 compared to the fourth quarter of 2013, and is at a new record high.

The Bureau of Labor Statistics reported on Friday that the economy added a net of 217,000 jobs in May, which wasn’t quite as much as in April, but still a reasonably healthy number. Employment increases were fairly broad-based, with more hiring in professional and business services, healthcare, eating and drinking places, and transportation and warehousing.

The official unemployment rate – which is compiled using a separate BLS survey than the jobs numbers – came in at 6.3 percent in May, unchanged from April. The alternate measurement known as U-6, which includes the traditional unemployed, but also discouraged works and part-timers who want to be full-time, came in at 12.2 percent in May, down from 12.3 percent in April.

For the week ending May 31, initial unemployment claims were 312,000, an increase of 8,000 from the previous week, according to the U.S. Department of Labor on Thursday. The more stable four-week moving average for the same week was 310,250, a decrease of 2,250 from the previous week, and the lowest level for that metric since June 2, 2007.

Negative Equity Keeps Dropping 

CoreLogic reported on Thursday that more than 300,000 U.S. homes returned to positive equity in the first quarter of 2014, bringing the total number of mortgaged residential properties with equity to more than 43 million. The CoreLogic posits that about 6.3 million homes, or 12.7 percent of all residential properties with a mortgage, were still in negative equity as of first quarter of 2014 compared to 6.6 million homes, or 13.4 percent, for fourth quarter of 2013.

Of the 43 million residential properties with equity, about 10 million have less than 20 percent equity, the company says. Such borrowers are “under-equitied,” and often have a hard time refinancing their existing home or obtaining new financing to sell and buy another property. Under-equitied mortgages accounted for 20.6 percent of all residential properties with a mortgage nationwide in first quarter of  2014, with more than 1.5 million residential properties at less than 5 percent equity, or near-negative equity, CoreLogic said.

“Despite the massive improvement in prices and reduction in negative equity over the last few years, many borrowers still lack sufficient equity to move and purchase a home,” Sam Khater, deputy chief economist for CoreLogic, noted in a statement. “One in five borrowers have less than 10 percent equity in their property, which is not enough to cover the down payment and additional costs associated with a conventional mortgage.”

Household Net Worth Continues Rising

In its latest quarterly Flow of Funds report, the Federal Reserve reported on Thursday that U.S. household net worth increased in the first quarter of 2014 compared to the fourth quarter of 2013, and is in fact is at a new record high, mainly because equities are so highly valued (but also because of home-price appreciation). Net worth previously peaked at $68.9 trillion in the second quarter of 2007, and then dropped to $55.6 trillion by first quarter of 2009. As of the first quarter of 2014, household net worth stands at $81.8 trillion.

The Fed also estimates that the value of household real estate increased to $20.2 trillion in the first quarter 2014, which is still $2.5 trillion below the peak in early 2006. In the first quarter of 2014, household percent equity (of household real estate) was at 53.6 percent, the highest since the first quarter of 2007.

Wall Street had an up day on Thursday ahead of the jobs numbers, with the Dow Jones Industrial Average and the S&P 500 both achieving nominal all-time highs. The Dow was up 98.6 points, or 0.6 percent, while the S&P 500 gained 0.6 percent and the Nasdaq advanced 1 percent.