When will most American workers return to work, and the U.S. economy return to normal? The Calculated Risk-FRED graph since 1992 tells us that retail sales have historically never varied substantially from a 5 percent annual increase, except during the blue bar recession periods indicated in the graph, and consumers and businesses have spent most of their pandemic aid. It could take another year.
The U.S. Census Bureau reported “Advance estimates of U.S. retail and food services sales for May 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $620.2 billion, a decrease of 1.3% from the previous month, but 28.1% above May 2020.”
Altogether, the number of people reportedly still receiving jobless benefits from eight separate state and federal programs totaled 14.8 million as of May 29, reports MarketWatch’s Greg Robb. It is down about 560,000 from the prior week. Last year, 30 million Americans were receiving these extra benefits, while the historical range receiving claims is in the mid-200,000s, so one can see why it might take another year for economic activity to return to normal.
Retail sales began to rebound last April with the first aid checks, and really took off this January with the additional recovery dollars going to individuals. Clothing and accessory sales are up 200 percent from May 2020, while food service and drinking places surged 71 percent and electronic and appliance stores gained 91 percent.
This sudden prosperity is creating many bottlenecks, raising all prices and shrinking the housing supply, with builders struggling to meet the increased demand.
Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,572,000. This is 50.3 percent above the May 2020 rate of 1,046,000, but is not enough construction to satisfy the soaring demand for more housing—new or used.
NAR chief economist Lawrence Yun commented on the May starts: “Despite the month-to-month trend, or even year-to-year changes, America is facing a massive housing shortage due to multiple years of underproduction in relation to population growth. We estimate around 5.5 to 6.8 million additional housing units need to be built. America is on track for only 1.6 million and 1.7 million new housing units this year and next, respectively. That would represent the best two-year performance in 15 years, yet it would still be inadequate. Therefore, expect both rents and home prices to outpace overall consumer price inflation in the upcoming years."
Calculated Risk
Where is this housing supply to come from? Estimates of population growth, demographic change, and demolitions suggest about 1.3 million households will form annually for the next few years, Goldman Sachs analysts said in a May note cited by Business Insider.
“Millennials are just reaching peak homebuying age and set to keep demand strong for the foreseeable future. Elevated lumber prices and lot shortages will continue to drag on construction even as starts accelerate. And while mortgage rates have risen from their pandemic-era floor, they still sit at historically low levels and should keep demand robust, the bank said.”
In 2021, the Mortgage Bankers Association (MBA) forecasts single-family housing starts to be around 1.134 million. And that could just be the beginning, as projections going forward are even rosier: 1.165 million single-family homes in 2022 and 1.210 million in 2023.
And we should see more entry-level homes under construction in 2021, says Joel Kan, associate vice president economic and industry forecasting at the MBA. That could help a potential pinch point, as too many entry-level buyers are helping to push up prices, making those homes unaffordable for that very group.
“We’ll see more affordable homes come onto the market as builders try to meet demand for these homes,” Kan says.
“Some 5.16 million people who have exhausted state compensation were also getting extra $300 a week in federal benefits as of May 29, down about 75,000 from the prior week,” says Robb. “The federal program ends in September and more than two dozen states are going to end the program early starting in the middle of this month.”
We know that will slow down the return to normal growth in those 25 states that are coercing their lower-paid workers to return to jobs they might not like. And that is on top of the need to find adequate housing.
Harlan Green © 2021
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment