Employment: A Long Road Back
As the economy begins to recover slowly from the pandemic shutdown, and under the continuous threat of further disruptions, employment is also beginning to rebound. Private employers and government agencies added 1.76 million jobs in July, bringing the total number to just under 140 million jobs.
This follows a collective gain of 7.5 million jobs in May and June. Yet despite these additions, employment today is still almost 13 million below the peak of 152.5 million jobs that the economy had reached at the beginning of the year.
At July’s pace, slower than the previous two months, any hopes of a fast economic recovery are fading quickly. Several economic sectors saw very modest gains in employment last month and a few sectors, such as Hospitality and Entertainment, have employment still far lower than their January peak, as seen in the chart below. Together, these sectors, Hospitality and Entertainment, account for 9% of total U.S. jobs.
Also, even though some areas have reported gains in employment, other industries and government agencies continue to furlough or lay-off workers, such as the nearly 1 million persons who applied for unemployment benefits in the week ended Aug. 8. Still, this was the first time in five months that unemployment claims fell below the 1 million mark.
That week’s claims, although remarkably high, is still a major improvement over the nearly 7 million persons who applied for benefits in the last two weeks of March, when the first economic shutdowns were imposed on businesses.
Demographic Groups Impacted Differently
Like most economic events, the pandemic shutdown impacts people in certain groups in different ways. Older individuals have generally fared better than their younger counterparts. Also, males have recovered faster than females and, along racial and ethnic lines we find differences.
Even though the unemployment rate for all age groups is today more than double what it was at the beginning of the year, on a percentage-point basis, the biggest increases have been among younger people.
For instance, as illustrated in the chart below, the unemployment rate among those age 20 to 24 years old was 11.7 percentage points higher in July than its level in January. This increase is more than that for people who are at least 35 years of age.
Generally, people under 35 saw their unemployment rate worsen significantly more than those older than 35. Persons between 35 and 54 years old, that is, those in their prime working years, saw the lowest impact.
Looking at employment from a slightly different angle, the number of employed who are younger than 24 is still nearly 19% below its January level. This is much higher than the gap for people who are 25 years or older, which is just 8%.
Similarly, so far males have fared slightly better than females, although the difference is not that great. Thus, the number of employed males is currently 9% lower than what it was back in January, while female workers are just one percentage point lower.
The unemployment rate among females had been traditionally slightly higher than that for males, roughly around half a percentage point. But this year, the gap has increased to nearly one percentage point higher. This is partly due to the fact that business areas of employment where women tend to concentrate, such as retail and hospitality, are ones that have suffered the biggest economic contraction.
The table above also displays the relative performance among racial or ethnic groups.
Mortgage Rates Edge Higher
Even though the 30-year, fixed mortgage rate rose by eight basis points last week (0.08%), this is a minimal increase that keeps the rate below 3%. The interest rate for ARMs (Adjustable Rate Mortgages) was unchanged from the previous week, remaining at 2.9%, while the 15-year rate moved up by a slight two basis points to just 2.46%.
Regardless of the increase, because it’s nearly negligible, observers expect home sales to have improved in July. And, in fact, the Mortgage Bankers Association indicated in its July survey that applications for home purchases had increased by 1% from June, and they were 39% higher than a year ago.
Manuel Gutierrez, Consulting Economist to NKBA
Explanation of NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator with a colored triangle that highlights visually the recent trend for each of the drivers. “Green” is a positive signal indicating that the latest value is improving; “Yellow,” as it’s common understood denotes caution because the variable maybe changing direction; and “Red” indicates that the variable in question is declining, both in its current value and in relation to the recent past.
Note that all the data, except for “mortgage rate” and “appliance-store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately-owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.
Single-Family Starts. It is the number of single family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.
Sales of Existing Homes. These data are issued monthly by the National Association of Realtors and capture the number of existing homes that were sold in the previous month.
High-End Home Sales. This series are sales of new homes priced at $500,000 and over. The data are released quarterly by the U.S. Department of Commerce, and are not seasonally adjusted. Thus a valid comparison is made to the same quarter of prior year.
Mortgage Rate. We have chosen the rate on the 30-year conventional loan that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building Materials Sales. These data, released monthly by the Department of Commerce, capture the total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also includes sales to projects other than residential houses.
Appliance-Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as Home Centers, for instance.
We hope you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further details.
