Employment plunged in April, with a record total of 20.5 million jobs lost for the month. The unemployment rate increased to 14.7%. This level of loss and the unemployment rate are post-World War II highs, and represent a partial reflection of the 33.5 million jobless claims that have been filed over the last seven weeks.
While the numbers are staggering, it is important to note that they are due to government-imposed public health strategies. For example, there are now 18 million people on temporary furlough. Hopes for a faster rebound in economic activity lay with this number. While NAHB’s forecast is more U-shaped for the overall economy (we see continued economic weakness persisting into the third quarter due to small business issues and elevated unemployment), these temporary layoff totals give a sense of the number of people who believe their job will return as the economy reopens.
Residential construction employment and remodeling declined by 415,000 positions in April. This decline places the industry employment total at 2.54 million, which is near November 2015 levels. Unlike the Great Recession, housing enters this downturn underbuilt, with a housing deficit of approximately 1 million residences. This potential demand means that housing is a sector that can provide economic momentum in a recovery. However, there are limiting factors such as the availability of builder financing. Indeed, banks reported net tightening for commercial real estate lending conditions, as well as declines for demand for such loans.
Despite the labor market plunge in April, housing demand showed some recent signs of optimism. Purchase applications for mortgages staged a small but positive set of improvements over the last three weeks as a sign of latent housing demand. Purchase application volume remains 19% lower than a year ago, however, due to both job losses and tighter credit conditions. Yet, housing held considerable momentum as we began 2020, so any recovery will feature renewed residential construction hiring and economic activity.
For more information and resources about the economic impact of the coronavirus, visit nahb.org/coronavirus.