Amidst a wounded job market, the nation’s infrastructure is also at risk, leading some policymakers to question whether tackling the second problem will bring relief to the first.
Jobs are the mesh holding the housing market together. Without jobs, people cannot qualify to purchase a home, make mortgage payments, pay rent, form households or generate any sort of momentum for the housing market.
Nationally, 10 million fewer workers are employed today than at the start of the pandemic. But even before the pandemic, the labor market was already precarious, with almost half of the American workforce earning low wages at a median annual salary of $18,000 or less, according to an analysis by Brookings.
Brookings proposes to combat 2020’s job losses and the low-wage labor market by developing a workforce lens towards federal infrastructure investment. The umbrella term “infrastructure” contains different categories of public systems, including roads, bridges, levees, broadband and drinking water.
Our national and state infrastructure both received C- ratings, indicating they require attention by the American Society of Civil Engineers. Investing in infrastructure will not only increase long-term productivity and growth, but it will also boost employment. Increased employment leads to a rise in demand for goods and services, in turn increasing GDP and putting upward pressure on wages.
More jobs also mean more household formations and a more stable real estate market.
Despite the federal government approving trillions of COVID-19 relief measures to avert mass unemployment, comparatively little has been allocated for infrastructure spending. However, the administration recently introduced a $2 trillion infrastructure and jobs plan which will be negotiated by Congress. The U.S. currently spends only 2.3 percent of its total GDP on infrastructure, whereas European nations spend an average of 5 percent. Just to meet basic infrastructure needs by 2025, the U.S. faces an estimated funding deficit of more than $2 trillion.
The job and real estate connection
Employment levels dictate real estate sales volume and rental occupancy rates. Without employment growth, the fiscal wellbeing of the population deteriorates. Much like a decaying road or bridge, the real estate market, too, crumbles without a high employment rate.
California lost 2.7 million jobs from December 2019 to its lowest point in April 2020. Some job recovery has materialized since then, down 1.4 million jobs as of December 2020. For reference of how long the remainder of our jobs recovery will take without any intervention, it took California four years to regain 1.4 million jobs during the recovery from the last recession. When considering the intervening population growth, reaching this recovery level took closer to five years.
The government’s solution thus far to the historic job losses which transpired in 2020 includes multiple stimulus packages, consisting of payments for individuals, enhancements and extensions of unemployment benefits and loan forgiveness programs for small businesses.
However, federal initiatives to hire more infrastructure workers are well within reach. Infrastructure spending enjoys bipartisan support and its potential to put jobless Californians back to work necessitates it even further.
In addition to the stimulus deals, both federal and state moratoriums on foreclosures and evictions have been in place throughout the pandemic and are currently scheduled to expire at the end of June 2021. But when the moratoriums eventually expire, foreclosures will cause inventory to rise, dragging home prices down. Without jobs, delinquent homeowners and renters will be unable to keep their housing when the moratoriums end. With jobs, they at least have a chance of remaining housed and repaying missed payments.
With a large-scale spending bill to help support jobs and infrastructure improvements making movements in Congress, struggling homeowners and renters may soon get greater access to the things they and the real estate market depend on: jobs.
Related article:
