Economic Update – Monday, August 9, 2021
Unemployment is as low as its been since COVID, but is misrepresented by those who have given up looking for work
The Delta Variant is driving COVID cases and could wreck more havoc on the economy
Eviction moratorium has once again been extended
Unemployment Falls to 5.4%
In July, the U.S. created a solid 943,000 jobs. This is a sign that our economic recovery is picking up steam and has beaten the recent assault by the highly contagious Delta variant. Wall Street’s estimates were not accurate. The U.S. experienced a significant increase in hiring in July, the largest in almost a year. This is good news for everyone.
The Wall Street Journal polled economists and predicted 845,000 new jobs. Last month saw 703,000 private-owned businesses add 703,000 employees, mainly in restaurants, hotels, and other entertainment and leisure providers. The strong increase in employment last month was also due to 240,000 increases in government payrolls. This is mainly due to seasonal swings in education, whose ups & downs have been exaggerated because of the pandemic.
The Bureau of Labor Statistics reports that unemployment fell to 5.4%, a sharp drop from 5.9% in June. Economists believe that the official rate is likely to underestimate true unemployment by up to two-three percentage points. Economists expect that more people will return to the workforce in the fall, once schools reopen and after the expiration of federal benefits.?
Keep in mind that employment is still at 5.7 million below the level it was in February 2020, just before the pandemic. This is what is holding back a robust U.S. economy recovery.
New Threat to the Economy from Delta Variant
The U.S. economy has reopened to full employment. However, restaurants, hotels, and theme parks continue to do well despite the fact that they are now facing a new challenge from the Delta variant. They also have to deal with mass labor shortages and other supply issues. According to the Institute for Supply Management, a survey of service-oriented companies rose to 64.1% in July, compared with 60.1% the previous month. Any reading above 50% indicates expansion.
Readings above 60% are extraordinary. As more people were vaccinated, the number of coronavirus cases dropped and companies that offer services like dining, accommodation, and entertainment finally experienced a return to normalcy in spring and summer. These businesses were severely affected by the pandemic. The sudden influx of new cases in the delta is creating new strains for their businesses. Some locales require businesses to verify that customers have valid vaccination cards and are making new mask requirements.
The good news is that this virus isn’t as dangerous as it seems, given how many people have been vaccinated and how companies have learned to deal with it. Unless caseloads are significantly higher, the delta variant of the virus won’t cause a major disruption to our economy. The level of production and new orders rose in July to near record highs. This survey dates back to 1998 when the size of the service sector wasn’t as great as it is today. After a negative June reading, employment also improved.
To attract more employees, companies offer higher wages and bonuses. Companies sometimes have to turn down customers because they don’t have enough staff. Millions of people who lost jobs or fled on their own during the pandemic have not returned to work. Another problem is getting supplies at affordable prices and on time. Companies have had to spend more on materials, and some of that cost has been passed onto customers. This has led to a sharp increase in inflation. Inflation is another threat to the recovery of the economy. It reduces the purchasing power of American households. As demand is at its strongest, and supply is struggling to keep up, our economy is literally bursting at all seams.
California’s Eviction Moratorium remains in effect until September. Despite the confusion surrounding the extension of the CDC’s eviction moratorium last week, here is the California situation. Governor. On June 28, Newsom signed a law that extended the state’s eviction moratorium until Sept. 30. This is the third extension of the moratorium by the state. Newsom said that a fourth extension was unlikely. However, with the
Recall imminent, he might be forced to extend again. California will pay 100% of unpaid rent to eligible tenants from April 2020 to Sept. 30, 2021. Tenants must be at least 80% of the area median income to be eligible. This amount varies depending on their location.?
The federal government provides the money, which is $5.2 billion. Nearly 113,000 people have so far requested $1 billion in aid. As of July 20, the state had paid $178 million. Even if they aren’t eligible, they can still be granted the eviction ban by paying at least 25% of their owed amount by Sept. 30. These tenants could be taken to court by the landlords to recover that money but they can’t evict them. Tenants are exempt from evictions until Sept. 30. Tenants are protected from evictions until Sept. 30, and landlords have 14 days for tenants to apply to rental assistance.
The tenant can be expelled if he or she refuses to apply, denies eligibility, and fails to pay at least 25% by September 30. California allows evictions for other reasons than unpaid rent. These include (1) breaking the lease agreement; (2) damaging the property or (3) using the property to commit an illegal act. California’s largest cities, such as Los Angeles and San Francisco Bay Area have some of the highest rental prices in the nation. According to data from Realtor.com, the median monthly rent in June was $2,801 for San Francisco and $2690 for Los Angeles.?
Prices are driven by a housing crisis in California, the most populous state in the country with almost 40 million inhabitants. California already has the highest number of homeless people in the country with the majority living in Los Angeles County. Combining a housing shortage with high rents, an end to eviction moratoriums may lead to a tsunami of evictions.