March 22, 2021
Although the US economy does a little bit better every month, it’s still well below the pre-pandemic level. Most importantly, 10 million people who lost their job still haven’t found a new one. Despite the accelerating pace of vaccinations and the further opening of states to more economic activity, it’s doubtful that the economy will return to normal this year. Remember that three-quarters of the economy is consumer spending – consumers just haven’t been willing (or able) to spend money as they did before.
One thing they have bought more of is homes. Not only did the homeowner market not suffered as during the last recession, strong demand pushed prices 6 percent higher. Record-low mortgage rates spurred buying so it’s too soon to know if demand will continue strong in 2021 or if this was a one-time phenomenon. One consequence we do know is that the number of properties available to renters is smaller just at the time when more people need to rent.
Overall, the number of jobs in February was down 6 percent from last year, a pattern that hasn’t changed in the last six months. The biggest loss remains at restaurants, where 16 percent of jobs from last year haven’t returned, but no sector of the economy has recovered. Jobs were down 4 percent in construction and manufacturing, 2 percent in retail, 3.5 percent in business services and healthcare, and 6 percent in government.
Of special concern for real estate markets is the job situation in both healthcare and government, where it’s getting worse rather than better. Lost financial revenues in these sectors can’t easily be recovered, so jobs won’t be, either.