Unemployment

For November, the U.S. Department of Labor’s Bureau of Labor Statistics reported a 5.8 percent unemployment rate for the Chicago-Joliet-Naperville, IL-IN-WI metropolitan statistical area. The number held steady from the previous month, but was down significantly from the 8.2 percent unemployment reported in Nov. 2013. Statewide, unemployment was down 6.4 percent in Nov. 2014, a slight decrease from 6.6 percent in Oct. 2014, which is down from 9.1 percent for Oct. 2013; the 2.5 percent drop represented the largest year-over-year decrease by state in the nation.

The state’s unemployment numbers have improved significantly, but they still lag behind the national average. The national unemployment figure for October was 5.8 percent, the lowest it has been since 2008, according to the Bureau of Labor Statistics.  The decline in jobless claims continued through the year. For the week ending Dec. 13, first time claims for unemployment benefits dropped to 289,000, from 295,000. For the same week in 2013, there were 368,000 new claims. In Illinois, there were 3,383 new jobless claims, down 561 from the previous week.

In the Chicago area, the job picture has improved dramatically, with year-over-year unemployment falling from 8.5 in Oct. 2013 to 6 percent in Oct. 2014, according to the U.S. Department of Labor. Average weekly wages topped $900 in Cook, Lake and DuPage counties, and averaged between $800 and $899 per week in Will County, according to Labor Department statistics from the first quarter of 2014. Total compensation increased at a rate of about 3.3 percent over the 12 months ending in September 2014, while wages and salaries rose by 2.3 percent.

Millennials

Millennials, typically defined as the generation born after 1980, are expected to become the driving force behind the housing market in 2015, according to realtor.com. New household formations are expected to continue increasing at a modest rate as Millennials take advantage of an improved job market and begin to set off on their own. The forecast from the National Association of Realtors indicates that better financial footing in the form of improved employment rates, higher wages and a reduction in debt will help the generation secure greater financial independence. Last year, the Pew Research Center released a study showing that about 23.6 percent of people age 25 to 34 were living with their parents.

The high unemployment rate among people belonging to the Millennial Generation – 10.9 percent for those age 20 to 24 and 6.1 for people age 25 to 34, according to the Labor Department – remains out of sync with the rest of the workforce and serves as a contributing factor to their reluctance to enter the housing market. Many who do strike out on their own choose to rent instead. High student loan debt and low wages hinder their ability to save for a down payment, while their debt loads also serve as a strike against them when they seek mortgages.

A May 2014 report by the Pew Research Center shows that about 37 percent of households headed by a person younger than age 40 carry student debt, with a median debt load of about $13,000. Student loans have a harmful effect on their entire economic well-being, as those young adults who are still paying for their college education have a net worth of only about $8,700, compared to $64,700 for those who do not have outstanding student loans. They have much more trouble accumulating wealth, in part because they also often have other debts, including car payments, mortgages and credit card debts. Pew found that student loan households have a median total debt load of $137,010, while their peers with no student loans owe $73,250.

In such scenarios, it can be difficult, if not impossible, to save up for a down payment, even in a housing market where mortgage rates remain low and prices have yet to recover from the 2007 crash. However, Federal Reserve Chair Janet Yellen signaled in her last press conference of 2014 that interest rates will likely rise this year, in light of the Fed’s analysis of the nation’s modest economic growth in the fourth quarter. Household spending and business investment are both up somewhat, though the Fed cited the housing sector’s growth as “slow.” As employment numbers continue to improve and inflation climbs toward the Federal Reserve’s target rate of 2 percent, mortgage rates also may creep up.