Job loss or other financial stresses often affect ability to pay rent. This is bad news not just for the renter but the landlord as well. Generous government support minimized the problem for a while but now it is getting worse. The data shown here is for apartments, not houses, so it may skew somewhat toward lower-income groups. But the geographical distribution is the interesting part.

 

 

Nationally, the year-over-year change in missing rent payments was 1.5% in September. However, it was considerably worse in metro areas like Las Vegas, Los Angeles, New Orleans, and Seattle. What do they have in common? For one, they are places where tourism accounts for many jobs. They also tend to have above-average living costs, making standard unemployment benefits less likely to cover high rent obligations. Property owners outside these areas may not have felt much pain yet but shouldn’t rest easy. This recession is a long way from finished.

To most Americans, Times Square is a place you see on TV filled with happy shivering people every New Year’s Eve. It’s also a major tourist and shopping area year-round. Certainly, we will all welcome 2021 when it gets here (soon, please) from whatever venue we can. But Times Square seems to be a lot calmer these days.

 

 

Each bar represents a month’s foot traffic, and you can see it plunged as the pandemic forced NYC into lockdown. But the miniscule recovery since then is more telling. Even with many business restrictions lifted, Times Square activity remains at a fraction of normal. The same is likely true of less famous shopping districts around the country. This isn’t what a “recovery” looks like.

New economic aid from Washington is bogged down because, among other things, lawmakers disagree about helping state and local governments. This chart shows the degree to which those governments are hurting. Such revenue loss will likely lead to layoffs and reduced services, the impact of which will spread through the economy.

 

 

US Economy

 

  • The ISM Services PMI index topped economists’ forecasts, pointing to stronger growth in service industries last month.
  • Service employment is back in expansion territory (PMI > 50).
  • Morgan Stanley’s forecast for Q3 and Q4 (see comment):

 

 

  • The CBO continues to downgrade its long-term GDP forecasts for the United States.

 

 

  • Essentially, there are two drivers of economic output: labor force expansion and productivity improvements. Based on the projections below, neither will provide a boost to economic growth.
  • The CBO is downgrading the nation’s population growth forecast (capping the labor force). Population growth will slow even more if immigration is curtailed.

 

 

  • And productivity gains are expected to be limited.

 

 

  • CoreLogic still expects home price appreciation to slow substantially over the next twelve months.
  • The recent rebound in retail sales was driven by department stores.
  • The rebound in job openings paused in August.
  • Permanent unemployment is rising faster than in previous recessions.
  • The trade deficit with Mexico is the largest on record amid increased US demand for automobiles. Mexico has now undercut China for low-cost manufacturing.

 

 

  • The consensus for the Q3 GDP rebound is 25% (annualized). Nonetheless, the nation’s economic output will remain below the pre-crisis trend, according to JP Morgan.
  • Analysts expect a sharp rebound in earnings in Q3.
  • How long will it take for the various economies to fully recover?

 

 

  • The job market recovery has stalled.
  • Commercial and residential rents have declined this year.
  • 2020 bankruptcies by sector.

 

 

  • Less spending money for the holidays:

 

 

  • According to Morgan Stanley, US households have built up substantial ‘excess’ savings.
  • One trend that allowed many households to save more was the postponement of liabilities: eviction moratoriums, mortgage forbearance programs, and student loan deferment
  • At some point, these liabilities will begin offsetting a portion of the ‘excess’ savings. Here are the balances of mortgages in forbearance
  • Total initial jobless claims are holding above one million per week.
  • Many small businesses are still struggling to pay their rent.
  • Since the financial crisis, business investment has been falling further behind the long-term trend.

 

 

Jobless Claims clearly showing the initial economic slowdown, then a partial recovery that seems to be stalling. RSM’s Brusuelas explains why it implies a much higher unemployment rate than the official data suggest.

  • Recent jobs data has a conundrum: More people are being fired than hired even as the unemployment rate falls.
  • The decline in the unemployment rate seems to be because people exhausting their benefits and exiting the labor force. Brusuelas estimates the real number may be 3 percentage points higher.
  • In the last six weeks, first-time unemployment claims averaged 867,000 and seem to have stabilized around that level.
  • Since mid-March, a stunning 63 million unemployment claims were filed in the US.
  • As of the week of Sept 19, approximately 25 million people were receiving benefits.

Seven months into recession, the equivalent of a large US city is still getting fired or laid off every week. This is an improvement but calling it “recovery” is a stretch.

 

Debt

 

More debt doesn’t lead to stronger rates of economic growth or prosperity. Since 1980, the overall increase in debt has surged to levels that currently surpass the entirety of our annual economic growth. With economic growth rates now at the lowest levels on record, the change in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare.

 

Energy

 

US oil production is back to 11 million barrels per day.

 

 

This chart shows US electricity generation by major energy sources over time.

 

 

COVID Update

 

Vaccine status:

 

 

Market Valuation

 

This chart shows US financial assets as a percentage of the GDP.

 

 

Interesting

 

What happens in an internet minute?

 

 

 

 

All Content is the Opinion of Brian J. Decker