May's employment growth of 2.5 million jobs, pushing unemployment to 13.3% from 14.7%, was good news and implies hiring activity bottomed in April - a month earlier than expected - and the rise in the employment-to-population ratio from 51.3% to 52.8% is proof. That said, there's a ways to go; unemployment peaked at 10% in the Great Recession and much fiscal support will soon expire. To maintain the recovery, some assistance must continue.
The June 3rd report on Mortgage purchase applications came in higher for the seventh week in a row and are now up 18% Y-o-Y. May private payrolls fell by 2.76 million but well below the 9 million expected. Moreover, oil prices continue to steadily rise and the yield on the 10-year Treasury is at 0.77% and has been slowly climbing since its closing low of 0.54% on 3/9/20.
Housing is rebounding surprisingly well. Home prices are solidly rising by the low to mid-single digits, new home sales probably bottomed in March at 619,000, first-time mortgage applications are up 9% Y-o-Y after being down 35% just six weeks ago, and existing sales will bottom no later than June (reflecting contracts signed in April and May). Yet housing will not lead us out of recession; that is entirely Covid-19 path dependent.
Fannie Mae and Freddie Mac are trying to do three things simultaneously; raise and protect their capital, generate a good rate of return for future investors, and in the public policy sphere, boost affordable housing and protect taxpayers. The problem, they can only achieve two of these objectives concurrently. For example, raising capital to protect taxpayers reduces returns. Alternatively, focusing on affordable housing goals and boosting returns hurts taxpayers. Privatization, maybe not.
Hotel occupancy is up for the seventh straight week, albeit from a staggeringly depressed level. For the week ending 5/30/20, US hotels reported an occupancy rate of 36.6%, pushing weekly demand to about 11 million room nights. The average daily rate per occupied room was $82.94, down 33.3% Y-o-Y. The average rate per room (occupied or vacant) was just $30.34 down 62.1% Y-o-Y.
Source: Elliot Eisenberg, PhD is Chief Economist for consulting firm GraphsandLaughs, LLC, serving a variety of clients across the United States. All rights reserved.
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