MBA’s Mike Fratantoni on job numbers and housing
April 6, 2021
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Today’s HousingWire Daily features an interview with Mike Fratantoni, the Mortgage Bankers Association’s Chief Economist and Senior Vice President of Research and Industry Technology. In this episode, Fratantoni discusses job growth and the nation’s latest unemployment rate, which is down to 6%, according to the U.S. Labor Department.
During the episode, Fratantoni delves into what factors contributed to the improvement in job growth and discusses the overall outlook for the nation’s job market and its likely impact on the housing industry.
Here’s a brief summary of HousingWire’s coverage of the latest U.S. unemployment situation:
After three months of mediocre gains, the U.S. unemployment situation brightened considerably in March. Total nonfarm payroll employment rose by 916,000 and pushed the unemployment rate down to 6%, according to the U.S. Labor Department. Sectors that were hit hardest by the pandemic led job growth last month, with jumps in leisure, hospitality, public and private education and construction – good signs for the housing industry.
The economy has recovered just over 62% of the jobs lost at the start of the recession and the Bureau of Labor Statistics estimates there are still 9.7 million unemployed persons – 4 million higher than at the beginning of Feb. 2020. Overall, there are approximately 4.2 million people who have been actively looking for work for more than six months.
However, March’s increase of nearly 1 million jobs contrasts dramatically with the job growth seen in February, when a mere 49,000 jobs were gained. The MBA expects this heightened pace to drop unemployment numbers to below 5% by the end of the year.
HousingWire Daily examines the most compelling articles reported from the HousingWire newsroom. Each afternoon, we provide our listeners with a deeper look into the stories coming across our newsroom that are helping Move Markets Forward. Hosted by the HW team and produced by Alcynna Lloyd and Victoria Wickham.
HousingWire articles related to this episode:
Below is the transcription of the interview. These transcriptions, powered by Speechpad, have been lightly edited and may contain small errors from reproduction:
Victoria Wickham: Hello, HousingWire listeners. Today I’m joined by MBA chief economist and senior vice president of research and industry technology, Mike Fratantoni. Mike, thanks for joining us today.
Mike Fratantoni: Thanks for having me.
Victoria Wickham: Absolutely. Well, today we’re here to discuss the nation’s unemployment rate and how it is impacting the housing market. According to the U.S. Bureau of Labor Statistics, the unemployment rate edged down to 6% in month of March. So, what factors contributed to this improvement in job growth?
Mike Fratantoni: So, March was a very strong month, I think really a turning point in this job market. We saw a 916,000 gain in total employment, and that was broadly distributed across the economy. Saw a big jump in leisure and hospitality jobs, but also in education, and manufacturing, and retail trade, and professional services, construction, really across the board.
We also know that factory activity expanded in March at the most rapid rate since 1983, so we are clearly in a new stage of the recovery, with much more rapid job growth, and that’s really very positive for the housing market.
Victoria Wickham: That’s interesting. Well, when looking at the housing market in particular, the bureau reports the construction sector gained 110,000 jobs during March. So, as the housing market has suffered from a lack of supply that is attributed to higher lumber costs and a lack of workers, will new gains in construction employment be enough to level off pent up demand in homebuilding?
Mike Fratantoni: It’s a good question. I think it’ll definitely help. It’s certainly a positive signal. Builders have told us for years that they are struggling to get enough people into construction careers. Really a shortage of those skilled tradesmen, carpenters, electricians, plumbers, framers, roofers, etc. But it really is only a part of the issue. As you mentioned, input prices are sky high, including lumber and other inputs.
And many builders tell us that in parts of the country, they are just having difficulty finding available lots on which to build. So, the sign of increased construction employment definitely positive. I don’t think it’s gonna cure our inventory problems just by itself, though.
Victoria Wickham: All right. Well, let’s paint a picture of the overall job market. We’re now more than one year into the COVID-19 pandemic, and data from the bureau indicates there are 9.7 million unemployed Americans, which is four million higher than the rate in February 2020.
Notably the bureau also indicates that more than 4.2 million people have actively been looking for work for more than six months, and total non-farm payroll employment sits at 5.5% below its pre-pandemic peak. So, what does this data say about the financial health of the American public?
Mike Fratantoni: So, it really is a tale of two job markets. For the vast majority of workers out there who have been able to work remotely through the pandemic, they’ve been able to save a lot, because they don’t have to commute. And really, it’s pent-up demand for any number of goods and services that I think is just gonna burst on the scene here over the next couple of months as the vaccine rollout continues to be successful.
So, you have a part of the job market that really has sort of been able to hunker down, and now is ready with some additional funds on hand to go out there and start spending. But then you have the other part that really has been severely distressed over the past year and more, and you mentioned the 4.2 million people who have been actively looking for work for six months or more. And probably the overlap here between folks that are unemployed and behind on their rent, or behind on their mortgage, in forbearance plans.
That’s why the federal, and state, and local government response to continue to provide support for these households that really have struggled through this time. Those supports are definitely still needed. And we’ve supported the American Rescue Plan for an additional financial support for both homeowners and renters.
Do anticipate that with the job growth we saw in March continuing in the next, you know, six to nine months, that many of those folks will be able to find jobs again. But it really is this very stark difference between people who have been able to weather this storm reasonably well, and those that have truly suffered.
Victoria Wickham: All right. Well, as we discuss how job losses are impacting Americans financially, I want to dive deep on homebuyer demand. In the week ending on April 1st, 2021, Freddie Mac claims the average U.S. mortgage rate rose one basis point, to 3.18%. Do you think mortgage rates will continue to rise, and if so, can we expect current homebuyer demand to continue?
Mike Fratantoni: So, we do expect rates are gonna rise from here. So, the combination of the improving job market, inflation that’s increasing, and very large federal budget deficits, we think those are all factors likely to put upward pressure on rates.
The Fed has committed to keeping short-term rates low, and for now, is continuing to buy some longer-term securities. But we wouldn’t be surprised if later this year, they begin to allow those QE purchases to taper. We do think they’re gonna keep short-term rates low all the way until 2023.
But even with somewhat higher mortgage rates, we think the improvement in the job market, and just very favorable demographic tailwinds are gonna keep the demand strong. Worried about affordability in some markets. Worried about the pace at which home prices are increasing. But hopefully some additional construction, new home supply, and perhaps even some increased existing home supply could help to decelerate that home price growth just a bit.
Victoria Wickham: Interesting. Well, a lot of great insight here today, Mike. But lastly, before we go, is there anything else that you’d like to add today, or anything else our listeners should know?
Mike Fratantoni: Well, we continue to track the forbearance numbers on a weekly basis, and good news again this week for the fifth straight week, forbearance numbers have declined. We’re down to about 4.9%, so it’s definitely trending in the right direction. Obviously, the extension of those forbearance terms, up to 18 months for Fannie, Freddie, and Ginnie Mae borrowers. Again, providing those relief for those households who’ve had the toughest time through this crisis.
Victoria Wickham: Mike, we thank you so much. We appreciate your time today, and thank you for joining us on HousingWire Daily.
Mike Fratantoni: Thank you very much.
