 [Intelligencer] The U.S. economy was supposed to be shrinking by now. Last fall, Bank of America predicted that America would be bleeding 175,000 jobs a month throughout the first quarter of this year. And the consensus outlook among investors, CEOs, and analysts was much the same: 2023 would be a year of recession, as rising interest rates choked off investment and consumer spending, forcing employers to slash payrolls.
But reports of the economy’s death have been greatly exaggerated. Last month, U.S. firms added 339,000 jobs. That’s a bigger monthly gain than the U.S. ever posted in 2019, a banner year for the American economy. Unemployment is still hovering around 3.5 percent, a half-century low. For the moment, labor market conditions are the opposite of recessionary.
And there’s little reason to think that this will change anytime soon.
When economic forecasters envision rising interest rates throwing the economy into recession, they typically picture the housing market cratering first. This is because housing is exceptionally sensitive to credit conditions. Home buyers generally take on mortgages to purchase their homes, and as mortgage rates soar, would-be buyers decide to stick with renting for a while longer. As demand cools, builders cut back on new developments, putting construction workers out of jobs. That in turn reduces the purchasing power of such workers, thereby slightly cooling demand for goods and services.
Indeed, when Forbes predicted in February that the U.S. economy was poised to rapidly weaken, it based this assessment on "a precipitous drop in housing permits."
But this week, new data revealed that both permits and housing starts rebounded sharply in May with the latter posting the biggest monthly gain since 2016. New home construction jumped 21.7 percent last month to a 1.63 million-unit annualized rate, while multifamily housing starts grew by 27 percent. Permits, a proxy for future construction, rose by 5.2 percent. 
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