July 14, 2021

Although the pandemic is still with us – now with the delta variant – most covid restrictions around the country have been lifted and economic activity is rapidly resuming. This means that economic data have real meaning again; we can compare local real estate markets and we can think about the longer-term consequences of the recession.

We’re currently in a surge of spending (much of it for real estate), but after that it’s most likely that economic growth will be fairly modest – as it was before the pandemic began, when the annual increase in jobs was 1.5 percent and real gross national product grew 2 percent.

The pandemic has done nothing to boost the competitiveness of American products or to provide better jobs for people who don’t have special skills. And the concentration of wealth in fewer hands has only increased. Without big programs to repair infrastructure, create new types of jobs or provide more social benefits (all politically unlikely) 2022 will economically be much like 2019.

Except that the pandemic increased the financial insecurity of many Americans, accelerated the automation of jobs, and degraded the financial situation of hospitals and local governments – as is clear from the numbers. In December the loss of jobs compared to pre-pandemic levels was 6.0 percent overall, 2.7 percent in healthcare and 5.5 percent in government. In June those numbers were 2.9 percent overall – a steady and big improvement – but still 2.9 percent in healthcare and 6.0 percent in government, no improvement at all for two of the largest parts of the economy.

This means there will be longer-lasting economic problems – and therefore lower demand for real estate – in local markets with a lot of jobs in healthcare or government. Classifying markets this way will help investors decide how best to invest there. And on the positive side, jobs in another large sector – business services – have recovered almost entirely and will be another indicator for local markets.

In June jobs were still down 2.7 percent in manufacturing, 0.4 percent in retail, 0.9 percent in business services, and 5.9 percent at restaurants. Construction jobs were up 4.3 percent.

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