The health of the labor market has a far-reaching impact on many areas of housing. Not only does the sector itself generate job opportunities, but when the economy is growing and the number of employed rises, so do home sales and mortgage originations.

According to the real estate research firm Hanley Wood Market Intelligence, there’s also a definitive link between employment and home prices.

Two analysts with the firm, Jonathan Dienhart and Ken Lee, conducted an analysis of metro area jobs data released by the Department of Labor for the month of March, juxtaposed with price trends for new homes.

In a Hanley Wood Housing Intelligence blog post, Dienhart and Lee lay out their findings.

Based on the Labor Department’s report, Milwaukee, Wisconsin; Dallas, Texas; and Houston, Texas were the best performing major metros when looking at year-over-uear increases in employment. Dienhart and Lee found that

these three markets also saw large double-digit increases in median new home prices.

Milwaukee recorded a 2.8 percent annual gain in employment in March. New home prices there surged 39 percent between March 2010 and March 2011, according to the analysts’ Housing Intelligence data.

Dallas claimed a 2.4 percent increase in employment over the 12 months ending in March. Over that same period, its median price for new homes jumped 19.6 percent.

Annual employment gains registered 2.1 percent in Houston, joined by a 13.2 percent rise in new home prices.

At the other end of the spectrum, the three worst performing metros in terms of annual employment movement were Sacramento, California; Baltimore, Maryland; and Atlanta, Georgia.

Sacramento saw its employment levels dwindle by 1.8 percent between March 2010 and March 2011. During that time, new home prices slid 6.3 percent.

Baltimore recorded a 0.4 percent drop in employment over the 12-month period, while the median price of a new home there fell 5.2 percent.

Same story for Georgia – a 0.2 percent decline in employment, accompanied by a 3.8 percent decline in new home prices.

“[O]ne could say jobs and housing are joined at the hip, with jobs leading the way,” the analysts said. “Regions that are creating jobs and keeping steady employment are seeing the positive results spill over into the local housing market which is why it is important for labor market conditions to continue to improve.”