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Residential construction jobs still haven’t returned

Unemployment rate drops to 4.6%

Following a less than stellar report in September, total 531,000 non-farm jobs were added in October, bringing the unemployment rate down to 4.6%, according to the U.S. jobs report released on Friday. Despite 10 consecutive months of net payroll gain, the U.S. economy is still more than 4 million jobs short of its pre-pandemic level. For the second month in a row the construction sector added jobs, rising by 44,000 jobs in October.

Unfortunately for the residential housing sector, most of these jobs were in nonresidential specialty trade contractors (19,000), and in heavy and civil engineering construction (12,000). Construction employment is still 150,000 jobs below its February 2020 level.

“Construction employment jumped by 44,000 in October, following an increase of 30,000 in September,” First American deputy chief economist Odeta Kushi said in a statement. “More hammers means more homes, so October’s gain signals an increase in new-home construction, and in turn more housing supply, may be on the horizon, which would benefit home buyers and the housing market.”

Despite this optimism, the latest housing starts report from the U.S. Census Bureau and the Department of Housing and Urban Development showed that there were only 1.55 million housing starts in September, below monthly expectations and a bit of a disappointment after August’s strong report.

“Residential building is up 5.4% compared with its pre-COVID pace, while non-residential building remains 4.4% below its pre-pandemic level,” Kushi said in a statement. “The growth in the average hourly earnings of production and non-supervisory employees in construction remains elevated at 5.2%, and we know the best attraction and retention policy is to pay more.”

The lion’s share of the month’s employment growth came in the leisure and hospitality (164,000 jobs), and professional and business services (100,000 jobs) sectors. On the other hand, employment in public education continued to decline (-65,000 jobs).

The rise in hiring across nearly all sectors is being attributed to the declining number of COVID-19 infections and a continued strong demand for workers.

Although unemployment and the labor force participation rate remain higher than their pre-pandemic levels, after the Federal Reserve announced that it will begin tapering its asset purchases in November, it is clear that they feel optimistic about the economy.

“The Federal Reserve announced the beginning of tapering, recognizing that the economy had made substantial further progress,” Mortgage Bankers Association chief economist Mike Fratantoni said in a statement. “Today’s report shows that conditions continue to improve briskly, with implications for the Fed’s next move as the economy edges towards liftoff and reaches full employment.”

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