More evidence of what is proving to be an unequal economic recovery in the United States surfaced on Thursday, with the jobs market continuing to downshift while the housing sector races ahead.
The number of people filing for state unemployment benefits increased by 4,000 last week to 870,000, the US Department of Labor reported, while the number of people filing for federal jobless benefits through the Pandemic Unemployment Assistance (PUA) fell by 45,074 to 630,080.
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The total number of people collecting benefits from both state and federal programmes fell from 29.7 million to 26 million in the week ending September 5, but there are two important caveats to consider with that figure.
First, it overestimates the true number of people collecting unemployment benefits because some are being double-counted on both state and federal programmes.
Second – and more crucially – as Oxford Economic Lead US economist Nancy Vanden Houton noted, “A big drop in PUA claims in California, where the data have been subject to fraud and other reporting problems, accounted for most of the decline.”
The upshot: layoffs remain widespread – a troubling sign, given the economy has only recovered about half of the 22 million jobs lost as lockdowns swept the nation in March and April.
As the jobs market recovery plateaus, the housing market keeps rebounding strongly.
Sales of new homes grew by 4.8 percent in August to exceed one million for the first time since the frothy days of the housing boom in 2006, the US Department of Commerce reported.
A hot housing market can help spur growth because home-building has a multiplier effect, meaning it creates more jobs throughout the economy.
A strong housing market can also boost the wealth of households that own their own home.
Rock-bottom mortgage rates and the lure of roomier suburban digs are conspiring to keep the housing market buoyant. But that does not mean it is immune to what is happening with the jobs market.
“While strong demand and lower mortgage rates are supportive of further growth in sales, the slow recovery and weak labour market pose downside risks that we expect will weigh on home sales in the months ahead,” said Vanden Houten.
That economic interconnectivity and the threat it potentially poses to the overall recovery is not lost on Federal Reserve officials, including chairman Jerome Powell who testified before Congress three times this week.
Powell used his face time with legislators on Capitol Hill to nudge them to pass a new round of virus relief aid, telling members of the Senate Banking Committee on Thursday, “I do think it’s likely that additional fiscal support will be needed.”
Powell has resisted naming specific types of fiscal stimulus, but when pressed on Thursday, he singled out affordable loans for small businesses and “something more for those who remain unemployed” as priorities for another aid package.