Editor’s note: The Washington Post recently reported that the unemployment rate would likely be 16.3 percent, not 13.3 percent, due to the misclassification of a large number of workers as absent from work as opposed to temporarily laid off.
In a stunning turnaround, the U.S. jobless rate improved in May, with employers adding 2.5 million jobs as lockdowns across the country ended and many businesses reopened.
Although there will likely be further setbacks due to riots and looting in many areas across the country, the latest data is a positive sign that the labor market is in recovery. In April, unemployment was at 14.7%, the highest since the Great Depression. In May, the jobless rate was at 13.3% as the number of unemployed persons who were laid off decreased by 2.7 million.
“Employment data quickly turned for the better, with surprising net job creations in May,” said National Association of Realtors Chief Economist Lawrence Yun in a press release. “There are still people getting laid off and filing for unemployment insurance for the first time, but job creations are exceeding that by a good margin.”
While enhanced unemployment benefits (set to expire in July) and stimulus money provided by Congress have meant the typical worker on unemployment has been earning more than he or she had been at work, it also means total personal wealth actually grew during the lockdown, said Yun.
“People saved around 8% of their income before the pandemic and they saved 33% of their income in the latest month,” he said. “With many economies advancing in phases of reopening, more money will be spent, and more job additions will follow.”
Construction jobs, which had fallen by nearly 1 million in April, came back in May with 464,000 additions. “Given the strong return of housing demand, construction jobs will continue to be added – perhaps more aggressively than in the past,” Yun said.
According to the report, jobs in residential construction increased by 9.2% in May, only 3.6% below May 2019. That’s good news for a housing market that’s been undersupplied for years, said First American Deputy Chief Economist Odeta Kushi.
“Pandemic-related pressure drove the supply of homes for sale to its lowest April supply level ever,” Kushi said in a press release. “Even in the years prior to the pandemic, the lack of housing supply for sale was a significant headwind to the housing market. Today’s report is not only a signal that the broader labor market has started to rebound, but a bright spot for a housing market in desperate need of more supply. More hammers, more homes.”
While an estimated 100,000 small businesses have closed forever as a result of the shutdown, the job market turnaround has begun, and housing is leading the way, experts say.
“The housing market is helping the economy in recovering from the recession — a role it has traditionally played in previous economic recoveries,” Kushi said. “Homebuilder confidence increased in May after April’s record-breaking decline, as builders responded to low mortgage rates and a continued rise in purchase applications, signs home buyers are back in the market.”
Yun agreed, noting housing’s recovery will happen faster than that of the overall economy.
“The housing sector is in a V-shaped recovery,” he said. “The broader economy will not be, and the double-digit unemployment rate may persist until the end of the year. Still, the latest jobs data is showing much better recovery potential.”