Housing Shakes Off Pandemic’s Drag but Employment Report Sends Warning Signals

If home sales alone were an indicator of economic health, you might conclude that the economy has rebounded smartly from the pandemic-induced recession and is on a path for steady growth.

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The forces driving the economy are no longer financial; they are primarily medical.  Concerns about the impact of the coronavirus, which continues to spread in the U.S. and abroad, have replaced speculation about whether the Fed will slash interest rates – which it did recently, announcing an “emergency” quarter-point reduction that analysts predict will be followed soon by another one, in an effort to forestall the panic that is gripping financial markets.

Analysts reached for superlatives – “blowout” and “blockbuster” among them ─ to describe November’s surprisingly strong employment report.  Employers added 266,000 workers to their payrolls, blowing well past the 187,000 economists had predicted.  October’s anemic 128,000 gain was revised upward slightly, to 156,000, and the unemployment rate remained unchanged at 3.5 percent.  Average hourly earnings increased by 7 cents – a 3.1 percent year-over-year gain.

Consumers are feeling better about the housing market, and the housing market appears to be feeling better about itself.

Recession fears, which had been inching higher, receded somewhat in October, as employment growth, low interest rates, and signs of life in the housing market offset concerns about a decline in manufacturing activity, anemic business activity, and slower worldwide economic growth.