Americans are back to work as evidenced by the addition of almost 7 million jobs over the past 12 months. In January alone, the U.S. added about 467,000 jobs amid the Omicron Variant crisis which proved that the job market is resilient and has enough momentum to pull through one of the biggest surges.
At the time the survey was taken, there was a rapid spread which upended many parts of the economy. Schools were closed, and businesses were shut down forcing many working individuals and parents alike to scramble. Surprisingly, you would expect the labor market to perform poorly but new data shows that the market performed really well during the stretch.
Applauding the U.S. economy and his government, the president said, “America is back to work. Our country is taking everything that covid has had to throw at us, and we’ve come back stronger. … America’s job machine is going stronger than ever.”
He further said that the report proves the “extraordinary resilience and grit of the American people. And American capitalism.”
In the past 12 months,, the labor market and the economy have grown so fast despite surges in the coronavirus at different time periods. Nonetheless, high inflation is countering the positive trajectory, posing a problem to many families and businesses. The president recognized these problems promising to keep trying to find solutions to address them. Meanwhile, the stock market had been strong throughout the year, only showing signs of weakness in the past few weeks as the Federal Reserve prepared to raise the interest rates.
In addition to the good performance in January, the Labor Department has more than doubled its tabulations of job gains for November and December. In November last year, the economy added 647,000 jobs and in December, it added some 510,000 more.
But what does this mean for the housing industry?
More people are getting back to work and this is a good thing. In fact, the average hourly earnings increased by 23 cents in January this year bringing the wage to $31.63. This was the largest increase in the last year. But, with inflation on the rise, much of these earnings are being swept away by rising prices of goods.
“There’s all kinds of good news that suggests people are getting back to normal,” said Drew Matus, chief market strategist for MetLife Investment Management. “In the big picture, it’s a very encouraging report. People returning to the workforce is what you wanted to see, and the gains were pretty widespread across different groups. The most important thing is people want to get back to work, and they’re trying to get back to work.”
Obviously, with more people getting absorbed in the labor market, this means increased economic power hence more buying power. People can afford to buy more real estate because they can afford it.
The challenge is, everything is being affected by inflation, and to add to this the housing market was already suffering huge blows mainly from constrained supplies of both new and existing units. This has led to massive increases in house prices which in turn has priced so many people out of the market.
In addition, materials and labor costs are such a huge problem to many developers and this continually derails the construction of new units. In the end, while many people are getting employed, it does them no good when it comes to housing thanks to inflation and high prices of homes.
Furthermore, with the mortgage rates rising, many people are feeling the need to postpone their aspirations of the American Dream and also I think right now people are more interested in bringing their lives and lifestyle to normalcy. Remember, thousands tapped into their savings just to survive, and therefore before making any major investment decision feels like a wrong move.
The Federal Reserve has also hinted at the possibility to raise the interest rates which will counter the harmful effects of inflation, in fact, FED officials are convinced that they have given the labor market enough support adding that any more delays to raise the interest rate might result in an overheated economy. If the interest rates are changed, this could greatly impact one’s ability to purchase a residential property. The lower the interest, the lower the cost of mortgage which in turn creates a high demand for real estate. This further pushes prices up.
If the FED hikes the interest rates, the cost of obtaining the mortgage will definitely rise which and at the same time control inflation. If inflation is kept at minimal and employment soars, we might see crazy bidding wars in the near future assuming supply remains below the demand levels.
With more Americans getting back to work, we can only that the housing market keeps up with the demand that’s about to blow out in the near future.