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As leaders in the mortgage industry, we're always looking at the industry economic metrics to determine the decisions we make in our businesses. In order to know whether or not we should invest in new technologies, hire more people or get into new business segments, we need to understand where the market is headed. Sometimes, however, it can be confusing because we receive conflicting information from the indicators that we follow.
When it comes to employment, there are two things we look at in an attempt to understand how the economy is fairing—job growth and wage growth. Lately, it seems as if job growth has been improving, but wage growth has been relatively stagnant. What do we make of this? Is this a sign of an improved economy, or are we still stuck in the same old spot? How do we interpret this information in order to make the daily decisions we need to make for our businesses?
As far as the mortgage industry goes, I think the job and wage growth rates are both important to look at for different purposes. When attempting to generate more loan originations, job growth creates a bigger pool to draw from. It is only in getting people back to work that we'll be able to get people back in homes. But, not everyone who has a job can afford a mortgage--that's where wage growth comes in. When people are bringing in more income from their jobs, they'll be more likely to move into homes.
So, both job growth and wage growth are important. Job growth increases the size of the pie; wage growth increases the strength of each individual slice. If one of these numbers is improving, we're headed in the right direction. But, when both are up, we'll know that the economy is improving and our industry will see the benefits.
David Lykken is 40-year mortgage industry veteran who has been an owner operator in three mortgage banking companies and a software company. As a former business owner/operator, today David loves helping C-Level executives and business owners achieve extraordinary results via consulting, coaching and communications, with the objective of eliminating corporate dysfunction, establishing and communicating a clear corporate strategy while focusing on process improvement and operational efficiencies resulting in increased profitability. David has been a regular contributor on CNBC and Fox Business News and currently hosts a successful weekly radio program, “Lykken on Lending,” that is heard each Monday at noon (Central Standard Time) by thousands of mortgage professionals. He produces a daily one-minute video called “Today’s Mortgage Minute” that appears on hundreds of television, radio and newspaper Web sites across America. He may be reached by phone at (512) 501-2810 or by e-mail at email@example.com.