Economic Update August 9
Previously we talked about how the economy would look as the economy tries to come back.? Early on may people thought it would be a fast recovery or V-shape, but with cases rising fastly throughout July, many think the recovery will be slower than expected.? The longer the coronavirus lingers the longer it will take for the economy to recovery
Employment grew for the 3 consecutive months, but the devil is in the details
Unemployment is going down, but it is still a lot higher than historical norms
President Trump signed an executive order for $400 dollar week unemployment, but there are some concerns on how it will work and if it’s legal
Mortgage rates hit all-time lows again, while delinquencies rose
Employment Growth.? The U.S. economy added 1.76 million new jobs in July compared to the 4.79 million added in June.? This change is due to the resurgence of Coronavirus cases, which has impacted the ability of many workers to return to their job.? Restaurants and retailers added the most, but they have also been most impacted during the Coronavirus as well.? California, Texas, and Florida have all been at the forefront in the last months as their totals soared to new highs and overtook Texas in total cases.? The United States attributes to 25% of the world?s total cases despite being less than 5% of the world?s population. Keep in mind that adjusted for seasonality because of school employment and taking out Census workers, jobs added would be even less by roughly 300,00.
Unemployment Rate. Some good news is that unemployment fell for the third month in a row to 10.2% from 11.1%. This is still high compared to historical standards, but lower than the peak of 14.7% in April. However, part of the improvement in the unemployment rate was because the U-3 labor force (people working or looking for work) declined 62,000, following large gains in May and June. Although the official jobless rate fell again, it?s quite likely the true level of unemployment is higher because a more accurate measure of unemployment known as the U-6 rate suggests the ?real? unemployment rate was really 16.5% in July (a bit lower from 18% in June). The U-6 rate includes millions of workers who can only find part-time jobs and those who have become too discouraged to look for jobs. There were over 22 million jobs during the height of the pandemic and so far only 9.3 million jobs have returned. This means more than half of those who lost their jobs are still unemployed.
Supplemental Benenfits
Over the weekend, President Trump issued several Executive Orders, including one for supplemental unemployment benefits at $400 per week. But the legality of his Executive Orders will likely be challenged in Court, so those $400 payments are in doubt. Accordingly, Congress still needs to put partisan bickering aside and reach a legislative compromise as soon as possible. There have also been several studies to show the importance of the $600 not just for individuals but for the economy as well.
Mortgage Rates. The 30-year fixed-rate mortgage dipped to a record low of 2.88% last week, dropping 11 basis points from the week prior, Freddie Mac reports. It was the eighth time this year the benchmark mortgage rate slipped to a record low. These lows rates have caused a spike in housing interest as people look to lock in rates, but uncertainty in the economy and general lack of houses have caused housing prices to rise. Many buyers are running into issues when trying to purchase homes and banks are making it tougher for borrowers to get loan because of the tumultuous times.
Mortgage Delinquencies. Mortgage balances continued to rise during the second quarter to $9.78 trillion, according to a national report by the New York Fed. Delinquency rates on mortgages ticked down though, with 1.08% of mortgage debt classified as ?serious delinquency? (90 days or more delinquent) in the second quarter compared to 1.17% in the first quarter. (Delinquency rates on student loans, auto loans, and credit card debt also declined quarter-over-quarter.) So far government mandates have prevented foreclosures, but that mandate will be lifted in August unless Congress extends the moratorium.