Despite ongoing challenges in the labor sector, the month of May proved strong relative to job creation. As reported on MBSHighway, Home prices also soared in April. What’s more, Fed members made headlines last week. This newsletter focuses on mortgage news for June 2021. The highly anticipated Jobs Report from the Bureau of Labor Statistics (BLS) revealed the following:
- Americans created 559,000 jobs in May.
- Though slightly beneath estimates and weak for private sector payrolls, this remains a respectable number.
- When financial experts take March and April (27,000 more jobs) figures into account, the total impresses even more.
- Hourly and weekly earnings both rose.
- Simultaneously, unemployment fell.
- The ADP Employment Report shows that private sector job creations soared in May.
- These represent a gain of 978,000 jobs. This is much higher than the 600k expected.
- We saw job gains across all sizes of businesses.
- However, April’s report was revised lower. Thus, the total number of jobs created in that month decreased from 742,000 down to 654,000.
Since the pandemic began, initial jobless claims hit their lowest level since COVID-19 first hit. The total finally fell below 400,000, as 385,000 unemployed workers submitted claims last week. In total, 15.4 million people still receive unemployment benefits, which is down 366,000 from the previous week. These improvements move us all in the right direction. However, real challenges remain for many families. For example, parents who lost access to important after-school programs and other childcare options feel the squeeze.
CoreLogic reports that, nationwide, home prices continue to appreciate. In fact:
- Home prices increased 2.1% from March to April.
- Prices also rose 13% year over year.
- This reflects an 11.3% annual gain reported for March.
- Tight inventory remains a key reason for appreciation.
- Finally, several Fed members made headlines commenting about their ongoing asset purchases.
Mortgage Bond Response
The Bureau of Labor Statistics (BLS) reported the creation of 559,000 jobs in May. Though this outperformed estimates and a weaker than the National Employment Report (ADP) report, it remains a strong number. In addition, slightly positive revisions were made to March and April (27,000 more jobs in two months, combined).
To put these numbers in perspective, consider there are 7.6 million fewer jobs now than pre-pandemic.
Note the fundamental difference between the two reports:
- The Business Survey considers headline job numbers. It is based predominately on modeling.
- The Household Survey (where the Unemployment Rate originates), is done by surveyors calling 60,000 homes.
- The Household Survey also includes a job loss or creation component. This showed the creation of 444,000 jobs.
- On a positive note, Unemployment decreased from 6.1% to 5.8%.
- While 444,000 jobs were created, the labor force decreased by 53,000.
- The number of unemployed people decreased by 496,000. This led to a drop in unemployment.
Further Unemployment Scrutiny
To further analyze these numbers, consider that the true Unemployment Rate is higher than the headline figure. That is because millions of people cannot look for work due to pandemic-related reasons. For this reason, the survey failed to count 2.5 million people who remain unemployed. When we add this into the calculations, the real Unemployment Rate is 7.2%.
In addition, people tend to misclassify people absent from work for other reasons. In many cases, they fail to mark those as unemployed (on temporary layoff). Without this error, the headline Unemployment Rate would have been 0.3% higher or 6.1%. What’s more, the real Unemployment Rate includes those unable to look for work due to pandemic reasons (estimated at 7.5%.)
- The all in U6 Unemployment Rate includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons. This number improved from 10.4% to 10.2%.
- Wages rose, as average hourly earnings were up 0.5% in May after rising 0.7% in April.
- Average weekly earnings, which measures what people actually take home, rose 0.5% in May after rising 1% in April.
- If we extrapolate the last three month’s numbers over the course of the year, weekly earnings show an increase closer to 7.5%.
- Also of note, leisure and hospitality wages increased by 1.3% in May. This occurred as businesses in those sectors raised wages to attract help.
About SoCal Platinum Properties, Inc.
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