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June jobs report is great news for the housing market

Residential building construction outpaces its pre-COVID 19 levels

Hiring in the U.S. picked up steam in June, as employers added 850,000 jobs amid declining COVID-19 cases and a reopening economy, the Bureau of Labor Statistics reported on Friday. After a lackluster April and May, June’s employment gains totaled 100,000 more jobs than economists originally predicted. The gains were so great that some housing industry economists believe construction job gains could relieve housing market supply constraints.

President Biden addressed the significant gains in a press conference Friday morning. Biden noted more than three million jobs have been created since he took office ― the most of any president in the first five months of their term. Of course, Biden’s presidency also began at a time when the U.S job market was 9.5 million jobs short of its pre-pandemic levels, so room for growth was inevitable.

Approximately 70% of the jobs lost at the start of the pandemic have been recouped. If monthly gains continue at the June pace, economists predict the U.S. could return to the pre-COVID employment peak by February 2022 – the same year some economists predict the housing market could regain its inventory footing.

“This is historic progress, pulling our economy out of the worst crisis in 100 years,” Biden said. “Put simply: our economy is on the move, and we have COVID-19 on the run.”

The unemployment rate, which is calculated from a different survey of households, ticked up to 5.9% from 5.8%, though it is important to note the details. Fewer workers reported working part-time for economic reasons, suggesting that they may now have full-time jobs. 

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The number of workers reported as “job leavers” also increased, lining up with the higher quit rate seen in other data, noted Mike Fratantoni, Mortgage Bankers Associations’ senior vice president and chief economist.

“There is a fair amount of churn in the job market right now as workers seek the best match, moving to jobs and sectors that are paying more due to the severe shortages in some segments of the both the job and housing market,” Fratantoni said.

As expected, gains were concentrated in the service-providing segment – which added 642,000 jobs – and in the leisure and hospitality sector, with 343,000 jobs gained. Those sectors of the economy were hit hardest by the pandemic.

As for the housing market, residential construction employment (including specialty trade contractors) rose by 15,200 last month, a more robust pace than in recent months, and a positive indicator for a sector facing severe supply constraints.

In May, the overall construction sector actually lost 20,000 jobs, though it was mostly concentrated among nonresidential specialty trade contractors. According to the BLS statistics, residential construction employment rose by a measly 1,900 jobs in May.

Residential building employment rose nearly 0.3% in June.

Construction employment is a non-substitutable input necessary to increase the both pace of housing starts and the housing stock, said Odetta Kushi, deputy chief economist at First American.

“More hammers, more homes” Kushi noted.

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