While the potential influence of continued high inflation adds an element of caution to the current state of the economy, Zonda chief economist Ali Wolf said her take on the overall economy is more positive during the latest COVID-19 Update webinar.
“We had really good jobs report data [in October], and, as long as we don’t see another run-up in COVID-19 cases and as long as we don’t see businesses and consumers responding too much, our expectation is that the economy does continue to grow from here,” says Wolf.
The positive signs for the economy start with October’s jobs data, which reported the economy added 531,000 jobs month over month. Coupled with revisions for data from August and September, total nonfarm employment is down 4.2 million workers from March 2020, or 81% recovered. In particular, the leisure and hospitality sectors, which were stagnant in recent months, are “back on track,” according to Wolf. While not directly related to the housing industry, a more equal distribution of job recovery could influence an increase in short-term interest rates more quickly than initially predicted.
“If we see a more universal rebound, if we see the labor market come back pretty quickly now that the service sector is showing more signs of life, that can impact the Federal Reserve policy,” Wolf says. “That trickles down into real estate, interest rates, and the economy moving forward.”
While job growth is positive, labor shortages are still widespread nationwide and impairing companies' abilities to meet demand, Wolf says. In the housing industry specifically, while 40% of builders reported having strong labor shortages in January, Zonda survey data from October indicates close to 80% of builders are experiencing labor shortage issues.
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