The 30-year fixed-rate mortgage rate has been known to follow, albeit loosely, the 10-year Treasury yield. The latter is a widely tracked economic indicator and serves not only as a sign for the pulse of the U.S. economy, but also as a premium for pricing myriad financial instruments, upon which characteristics specific to the financial instrument are added.

As 10-year Treasury yields continued to hover near record lows in June, the 30-year fixed-rate Mortgage Rate continued to fall moderately in the same period. The below figure indicates that the gap between the two rates was a little shy of 250 basis points in the past four weeks. The volatility in the 10-year Treasury owes to the mixed reaction by the market of the positive news of nonfarm payroll gains offset by persistent unemployment claims.

As the 10-year Treasury yield is a more representative measure of all sectors of the economy, lenders can only keep mortgage rates so far away from it. Nonetheless, the housing market seems to have a clearer sense of direction on the road to economic recovery and leads it, with purchase applications having shown week-to-week gains for two months up through mid-June. Additionally, housing demand is well supported by low interest rates.

In June, total payroll employment rose by 4.8 million and the unemployment rate dropped to 11.1%. The June data indicate that labor market is recovering from the COVID-19 crisis, though the road to a full recovery may be long.

Residential construction employment rose by 83,200 in June to 2.8 million. Total construction industry (both residential and nonresidential) employment rebounded to nearly 7.2 million in June.

In the Employment Situation Summary for June, total nonfarm payroll employment increased by 4.8 million, following an increase of 2.7 million in May. The increases in May and June reflect the economy starts to recover from the COVID-19 pandemic. Monthly job changes in April and May were revised. The April monthly change was revised downward from an initial estimate of -20.7 million to -20.8 million, while the May increase was revised upward by 190,000 from +2.5 million to +2.7 million. After the economy lost 22.1 million jobs in March and April due to the impact of the COVID-19 pandemic, about 7.5 million jobs were created in May and June. Thus, total nonfarm payroll employment in June was 14.7 million lower than its February level.

Employment in leisure and hospitality, an industry that was hard hit in the COVID-19 pandemic, rose sharply in June. Retail trade, education and health services, manufacturing, and professional and business services also had the significant gains in June, while mining and logging continued to decline.

Meanwhile, the unemployment rate dropped to 11.1% in June, down from 13.3% in May. In June, the number of employed persons increased by about 4.9 million, while the number of unemployed persons declined by 3.2 million to 17.8 million. Among all the unemployed persons, about 60% classified themselves as on furlough or a temporary layoff and expected to be recalled back to work. The labor force participation rate, the proportion of the population either looking for a job or already with a job, rose by 0.7 percentage point to 61.5% in June, 1.9 percentage points below its February level.

The June decline in the unemployment rate and dramatic job gains amid the COVID-19 pandemic show early signs of recovery as states reopen and more people go back to work. These improving job situation is also a cause behind recent relative strength in housing demand.

Additionally, employment in construction continued to improve in June. Employment in the overall construction sector increased by 158,000 in June, after a revised increase of 453,000 in May. The number of residential construction jobs rose by 83,200 in June, after an increase of 224,200 in May.

Residential construction employment now stands at 2.8 million in June, broken down as 795,000 builders and 2.0 million residential specialty trade contractors. The 6-month moving average of monthly job changes for residential construction is -17,983 a month, mainly reflecting the largest job loss in April. Over the last 12 months, home builders and remodelers shed 83,900 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 834,200 positions.

In June, the unemployment rate for construction workers dropped to 12.0% on a seasonally adjusted basis, from 15.2% in May. The unemployment rate for construction workers has trended downward for the past ten years and remained at a relative low level in the beginning of 2020. The recent unemployment rate reflected the impact of the COVID-19 pandemic on construction industry.

While weekly initial jobless claims decreased for the 13th straight week, continuing claims, which lags initial jobless claims by one week, rose by 59,000 in the week ending June 20. The labor market is gradually recovering from the COVID-19 crisis as workers return to work, albeit slowly, and a full recovery of labor market may take a while with an uncertain future.

The U.S. Department of Labor released the Unemployment Insurance Weekly Claims Report for the week ending June 27. The number of initial jobless claims declined slightly by 55,000 to a seasonally adjusted level of 1,427,000, compared to the previous week’s revised claims of 1,482,000. Initial claims have declined for the past 13 weeks from the peak of 6.9 million but remained above 1 million. The four-week moving average decreased to 1,503,750, from a revised average of 1,621,250 in the previous week. Weekly new claims brought the 15-week’s total to 48.7 million.

Meanwhile, the number for seasonally adjusted insured unemployment, known as continuing claims, rose slightly by 59,000 to a seasonally adjusted level of 19,290,000 in the week ending June 20. Continuing claims stayed below 20 million for the second week. The four-week moving average declined by 494,500 from the previous week’s revised average to 19,854,000. The seasonally adjusted insured unemployment rate remained unchanged at 13.2% for the week ending June 20. The previous week’s rate was revised down by 0.2 percentage point from 13.4% to 13.2%.

The U.S. Department of Labor also released the advanced number of actual initial claims under state programs without seasonal adjustments. The unadjusted number of advanced initial claims totaled 1,445,481 in the week ending June 27, a decrease of 14,575 from the previous week.

The chart below presents the top 10 states ranked by the number of advanced initial claims for the week ending June 27. California, Georgia and Texas had the most advanced initial claims. California led the way with 279,341 initial claims, followed by Georgia with 115,750 initial claims and Texas with 96,141 initial claims. Meanwhile, it is the fourth straight week that South Dakota (+576) had the least advanced initial claims across all the states.

Compared to the previous week, Indiana, Michigan and Washington had the largest increases in advanced initial claims for the week ending June 27. Indiana reported an increase of 24,033 advanced initial claims. Michigan increased by 17,671 and Washington increased by 8,110. Oklahoma (-41,933), Florida (-11,075) and Maryland (-10,620) had the largest decreases in advanced initial claims.