After three months of mediocre earnings, the unemployment situation in the United States improved considerably in March. Total non-agricultural wage bill employment increased by 916,000 and lowered the unemployment rate to 6%, according to the United States Department of Labor. Sectors that have been hit hardest by the pandemic led job growth last month, with jumps in recreation, hospitality, public and private education, and construction – good signs for the housing sector.
The economy has recovered just over 62% of the jobs lost at the start of the recession and Bureau of Labor Statistics estimates that there are still 9.7 million unemployed – 4 million more than at the start of February 2020. Overall, there are around over 4.2 million people who have been actively looking for work for over six months.
However, the increase of nearly one million jobs in March stands in stark contrast to the employment growth seen in February, when only 49,000 jobs were gained. the Mortgage Bankers Association expects this accelerated pace to bring unemployment figures below 5% by the end of the year.
According to Odetta Kushi, First American ‘s Deputy Chief Economist, COVID-19 has been the great recession for the service industry, especially the leisure and hospitality industry. The youngest and lowest paid workers have been hit the hardest. This sector posted the largest gains in March with 280,000 new jobs, and there will likely be more with wider vaccine distribution and business reopening.
“The rate of labor force participation in the prime of life fell in the aftermath of the Great Recession and it took a decade to return to the pre-Great Recession (2001-2007) average of 83%” , Kushi said. “The COVID recession wiped out those gains, but with more vaccinations and businesses reopening, there is more scope to remove workers from the sidelines.”
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For housing, March created 110,000 construction jobs – a positive sign in an industry struggling with supply constraints. There is currently a desperate shortage of inventory in the housing market, which is driving home prices at an unsustainable rate, noted MBA Senior Vice President and Chief Economist Mike Fratantoni.
Total construction employment remains 182,000 below its February 2020 level. But Fratantoni is confident that with job growth and good prospects for the rest of the year, housing demand will remain quite strong. , even if mortgage rates increase greater than 3.5%.
“While the job market is certainly recovering quickly, the stimulus payments and assistance to tenants and landlords who were part of the American Rescue Plan will provide support to struggling people who are unemployed or underemployed,” including the 2.5 million homeowners currently in forbearance plans, ”said Fratantoni.
Residential construction jobs, on the other hand, were up 3.9% from the peak of the pre-2020 recession in February 2020. March was the highest number of residential construction workers since 2008. But the prime-age labor force participation rate has barely budged and remains 1.6% below the pre-COVID rate. A smaller active workforce means less labor resources available for the production of goods and services, which could hamper economic recovery.
The lack of available housing in the market has a negative impact on the marginal buyer who feels a squeeze in affordability. In February, sales of new homes, sales of existing homes and pending home sales also experienced month-over-month declines. But these numbers come from a pandemic anomaly. Purchase loans are still peaking year over year, however, the refi market takes a hit on the rise in rates.
“We need more hammers at work to build more houses,” Kushi said.