Friday, March 5, 2021

Employment Surge Boosts Recovery

 Popular Economics Weekly

Another sign of a roaring 2020’s economy just came out, per the Bureau of Labor Statistics (BLS) today. The February employment report added 355,000 jobs just to payrolls in leisure and hospitality — restaurants, hotels, casinos, theaters—all in the service sector.

These industries had lost 500,000 jobs during the pandemic. A total of 379,000 jobs were created with manufacturing, wholesale trade and retail sales adding to the total.

“The rebound in job creation in February is likely the start of a major new cycle of hiring. Warmer weather, falling coronavirus cases, rising vaccinations and another massive increase in federal stimulus are likely to act as jet fuel for the economy in the spring and summer,” says MarketWatch’s Jeffry Bartash.

A rebound in the service sector is what economists have been waiting for. It means more consumer spending on travel, dining out, and visits to public venues like sports and museums.

There is one caveat, however. Dr. Fauci and other health experts are warning that the pandemic fight isn’t over. There could be an infection surge in the spring with new variants of the virus beginning to appear for which the current vaccines are not as effective.

COVIDTrackingProject

CDC head, Dr. Rochelle Walensky, has repeatedly warned that declining case numbers have stalled at a high level, and urged Americans to stick with the recommended safeguards — frequent hand washing, social distancing and wearing a face mask in public — until it’s their turn to be vaccinated.

"Things are tenuous," Dr. Rochelle Walensky said at a White House briefing. "Now is not the time to relax restrictions." The U.S. is still averaging about 70,000 cases a day and the seven-day average is higher today than it was earlier in the week, she said. "This recent shift in the pandemic must be taken seriously," she said. If the infection rate remains at such a high level, the virus, and new variants of the virus, will continue to spread, she said. "We may be done with the virus, but the virus is not done with us,"

This happened with the Spanish flu pandemic of 100 years ago, which prolonged the original ‘roaring 20’s’ recovery for another year. It is literally a race to vaccinate as many people as possible to limit the spread of these new variants.

Harlan Green © 2021

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Wednesday, March 3, 2021

Manufacturing Boosts Economic Recovery

Financial FAQs


Manufacturing activity is roaring back. It joins construction and housing sales as the main drivers of economic growth at the moment. And we need all the drivers of economic growth to keep this economy in the black with what is coming--more climate unpredictability; the Texas deep-freeze being the latest example.

The ISM Manufacturing Index that measures purchasing managers’ sentiments is at 60.8 percent, a two-year high. This means almost 61 percent of manufacturing purchasing managers see increased activity ahead. Reuters lists its strengths:

  • The headline index hit a new post-pandemic high of 60.8, versus 58.7 last month and a forecast of 59.0.
  • The delivery lead-time index was the largest single contributor to the increase (up 3.8 points to 72.0), which is not entirely a positive development, but the orders and production indexes posted solid gains to 64.8 and 63.2 respectively.
  • The customers’ inventory slipped again to another new 11-year low of 32.5, which implies sustained demand in the months ahead.
  • Sentiment remained upbeat in the anecdotal portion of the survey. The survey managers reported that positive comments outnumbered cautious remarks by five to one this month, up from three to one in both December and January.

Fourth Quarter GDP growth was just revised upward to 4.1 percent from 4.0 percent in the second estimate, and economists are predicting even faster growth this year, but that is only if effects of the pandemic subside and there are no more major climate disasters like the Texas, Alabama, Arkansas, and Louisiana deep freeze in which millions lost power and clean drinking water.

The increase in fourth-quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the fourth quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.

What is the main driver of all this activity? Higher Personal Income and Outlays, also per the U.S. Bureau of Economic Analysis (BEA).

Personal income increased 10.0 percent (monthly rate) while consumer spending increased 2.4 percent in January as pro,visions of the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act enacted on December 27, 2020, began to take effect.

That is a huge jump in personal incomes, thanks to the $900 billion December pandemic aid package.  Much of it is being saved by consumers as they wait for the pandemic to subside before spending more on leisure services like entertainment and travel.

Consumer sentiment had edged downward in early February and is at a six-month low in the U. of Michigan sentiment survey, with the entire loss concentrated in the Expectation Index and among households with incomes below $75,000 (the income brackets targeted by the government cash payouts), as I said last weekHouseholds with incomes in the bottom third reported significant setbacks in their current finances, with fewer of these households mentioning recent income gains than anytime since 2014 (see the chart), said the U. Michigan survey.

That is the main reason the $1.9 trillion American Rescue Plan will soon pass with only minor changes, with or without Republican votes. It will go to those that need it the most to survive this once-in-a-century pandemic. It is extremely popular with a 76 percent approval rating per the latest Politico survey.

And why not with upcoming climate changes predicted to cause even more natural disasters?

Harlan Green © 2021

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Friday, February 26, 2021

January Home Sales Exceed Expectations

 The Mortgage Corner

The Calculated Risk/FRED graph shows that new-home sales are approaching the 2000 level at the start of the last housing bubble that ultimately resulted in the Great Recession (blue bars are recessions). But that doesn’t mean we are at the beginning of another housing bubble.

New home sales for January were reported at 923,000 on a seasonally adjusted annual rate basis (SAAR), said US Census Bureau, resulting in the decline to just 4.0 months of supply remaining for sale. That and still record low interest rates are boosting prices. But there is no bubble forming because there is not enough supply to satisfy current demand. Sales for the previous three months were revised up, also.

Existing-home sales are soaring this early in the year as well because last year’s selling season had a delayed fall start due to the pandemic, according to the National Association of Realtors (NAR). We can expect this surge to also continue because of ongoing demand.

Total existing-home sales, https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 0.6 percent from December to a seasonally-adjusted annual rate of 6.69 million in January. Sales in total climbed year-over-year, up 23.7 percent from a year ago (5.41 million in January 2020).

Demand is so hot that the median existing-home sales price rose to $303,900, 14.1 percent higher from one year ago. And as of the end of January, existing-home inventory fell to a record-low of 1.04 million units, down by 25.7 percent year-over-year – a record decline.

"Home sales continue to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market," said NAR chief economist Lawrence Yun. "Sales easily could have been even 20% higher if there had been more inventory and more choices."

Residential construction is pushing hard to catch up to demand, as I said last week. Privately-owned housing starts in December were at a huge seasonally adjusted annual rate of 1,669,000, said the Census Bureau. This is 5.8 percent above the revised November estimate of 1,578,000 and is 5.2 percent above the December 2019 rate of 1,587,000.

Home sales are repeating their traditional role as a leading indicator with economic growth predicted to surge this year. Economists are now predicting a ‘V’ shaped recovery with Deutsche Bank increasing its GDP growth forecasts for 2021 and 2022, assuming the final fiscal aid package will be worth $1.6 trillion to $1.7 trillion, reports Reuters. “Their inflation numbers pushed a bit higher too with risks on the upside,” wrote Jim Reid, a strategist at the bank.

Reuters also reports Pimco, one of the world’s largest fixed income managers, said in a research note that the additional stimulus could “contribute to 2021 real GDP growth of over 7%,” a level not seen since “the great inflationary episode of the 1970s-1980s.”

Chief economist Yun expects more jobs to return in his press release, which will spur home buying in the coming months. He predicts existing-home sales will reach at least 6.5 million in 2021, even as he says mortgage rates are likely to inch higher due to the rising budget deficit and higher inflation.

But interest rates are still at recession lows, with the 30-year conforming fixed interest rate currently 2.75 percent with one origination point for the best credit holders.

With housing inventory at the end of January down 25.7 percent from one year ago, the unsold existing-home inventory sits at a record 1.9-month supply at the current sales pace, down from the 3.1-month amount recorded in January 2020.

All this news means the housing revival will continue.  What better sign is there of a consumer spending revival this year?

Harlan Green © 2021

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Wednesday, February 17, 2021

Retail Sales Start Roaring 2020's Boom

 Popular Economics Weekly


It looks like the 2020’s economy is beginning to roar as retail sales jumped 5.3 percent in January 2021, and 7.4 percent since last January. This is just as President Biden’s approximately $1.9 trillion American Rescue Plan is wending its way through congress.

Advance estimates of U.S. retail and food services sales for January 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $568.2 billion, an increase of 5.3 percent from the previous month, and 7.4 percent above January 2020, said the US Census Bureau report.

Pundits and some economists worry that this is too much “untargeted” money sloshing around the economy, including an additional $1400 per person that will supplement the $600 payments made in January to those making less than $75,000 per person.

Nobel laureate Paul Krugman does not think so, he said in a recent Op-ed, because those that need it will spend it immediately, while the less needy will squirrel it away for another rainy day; a good thing given these uncertain times.

And there is little inflation now, as the Consumer Price Index (CPI) retail inflation measure did not increase at all last month and is up just one percent over the past year.

Sales were strong in every category. Department store chains, Internet retailers, electronic stores and home-furnishing outlets all recorded double digit gains in percentage terms.

Bars and restaurants also registered a nearly 7 percent increase in sales after receipts had fallen three months in a row. Cold weather and new business restrictions imposed after a record increase in coronavirus cases, slammed restaurants toward the end of 2020, but states started to lift restrictions early in the new year as the pandemic began to wane again, reports MarketWatch’s Jeffry Bartash.

“The increase in spending last month was fueled in part by $600 federal stimulus checks for millions of Americans and more generous unemployment benefits. What also helped were loosened state restrictions on business brought on by a sharp decline in coronavirus cases,” said Bartash.


Now is not the time to worry about inflation, in other words. Rising prices increase profits and wages, especially in the recovery stage of this recession. Slow real personal income growth portrayed in this FRED graph has been one reason for slow economic growth since the Great Recession ended some 11 years ago and kept US from spending more on upgrading our deteriorating infrastructure.

Personal income has fluctuated between 2 to 3 percent since then, which is not enough to boost household incomes above the long-term inflation rate. In fact, household income has not risen enough for most Americans to weather such natural disasters as this pandemic, and what is to come with global warming and future geopolitical uncertainty that accompanies a changing climate (droughts, immigration woes, increasing wildfires, hurricanes, etc.)

The Texas freezes and power outages from the current Polar Vortex episode that could last through this weekend are but one example. As reported in the LA Times by a Houston reporter, “Extreme weather events are becoming more frequent and more severe as the climate crisis worsens. And the U.S. power grid is not prepared to handle the hotter heat storms, more frigid cold snaps and stronger hurricanes of a changing planet.”

What better time is there to prepare for such future emergencies?

Harlan Green © 2021

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Tuesday, February 16, 2021

Another Roaring Twenties--Part II

 Financial FAQs


For another ‘Roaring Twenties’ recovery to happen, Nobel Prize-winner Joe Stiglitz warns in Project-Syndicate that we must pass President Biden’s $1.9 trillion American Rescue Plan.

“Biden’s proposed spending plan is urgently needed. Recently released data show a slowdown in America’s recovery both in terms of GDP and employment. There is overwhelming evidence that the recovery package will provide enormous stimulus to the economy, and that economic growth will generate substantial tax revenues, not just for the federal government but also for the states and municipalities that are now starved of the funds they need to provide essential services.”

The University of Michigan’s early February consumer sentiment survey says much the same. Consumer sentiment edged downward in early February, with the entire loss concentrated in the Expectation Index and among households with incomes below $75,000 (the income brackets targeted by the government cash payouts).

“Households with incomes in the bottom third reported significant setbacks in their current finances, with fewer of these households mentioning recent income gains than anytime since 2014 (see the chart),” said the U. Michigan survey.

When asked to assess their current financial position, the deep divisions become apparent: among those with incomes in the bottom third, just 23 percent reported improved finances, the lowest since 2014; in contrast, among those with incomes in the top third, 54 percent reported their finances had improved. Mentions of income gains fell to just 17 percent among those in the bottom third, compared with 44 percent in the top income third.

The end result is more layoffs - one million-plus applications for unemployment benefits are still being filed each week. Jobless claims total almost 800,000 at state level and 334,524 file though federal emergency program in early February.


Why won’t the $1.9 trillion in additional government spending cause too high inflation, or some other excess from the fear of too hot economic growth? Because interest rates are in effect at zero, and so is retail (CPI) inflation.

Interest rates measure the cost of money, which in effect is cost-free, at the moment. There is so much money floating around the world’s economy that lenders are begging borrowers to use that surplus, and actually paying borrowers in the case of certain EU countries with negative interest rates.

Now is not the time to hoard what can be used to improve lives—especially the lives of those -such as those police, healthcare essential workers that keep this economy working.

A first priority say leading economists, is to make sure enough funds are available to fight the pandemic, then get children back into schools, as well as allowing state and local governments to provide the essential services we all depend on.

Harlan Green © 2020

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Thursday, February 11, 2021

The American Rescue Plan Must Pass

 Popular Economics Weekly


The number of job openings was little changed at 6.6 million on the last business day of December, the U.S. Bureau of Labor Statistics reported yesterday. Job growth slowed in January with just 49,000 net payroll jobs created, which is why even Fed Chair Janet Yellen maintains the American Rescue Plan currently in debate must pass.

Janet Yellen said on Sunday the country was still in a “deep hole” with millions of lost jobs, but that President Joe Biden’s $1.9 trillion relief plan could generate enough growth to restore full employment by next year.

“There’s absolutely no reason why we should suffer through a long, slow recovery,” she said.

Otherwise, the Congressional Budget Office projects the unemployment rate could remain elevated for years to come and take until 2025 to get unemployment back to 4 percent, in a recent CBO analysis done on the effects of raising the national minimum wage to $15 per hour by 2025. The jobless rate stood at a half-century low of 3.9 percent a year ago before the pandemic.

Barron’s reports retailers, warehousing, construction, durable-goods manufacturing, and healthcare lost a combined 110,000 jobs in January—all for the first time since last April.

The above graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS. The sharp spike in red columns showed how severe were last year’s job losses, with 20 million jobs lost last April and May 2020. Layoffs and Discharges were back down the 5.5 million in January.

In December, the number of hires decreased to 5.5 million (-396,000), per the BLS. Hires decreased in accommodation and food services (-221,000); transportation, warehousing, and utilities (-133,000); and arts, entertainment, and recreation (-82,000). Hires increased in retail trade (+94,000).


The NFIB Small Business Optimism Index also declined in January to 95.0, down 0.9 from December and three points below the 47-year average of 98. Owners expecting better business conditions over the next six months declined seven points to a net negative 23%, the lowest level since November 2013, said the report.

Small business owners are just as excited as consumers in seeing more economic aid from the congress, in part because a separate survey from the NFIB showed a third of small businesses reported in January that they had vacancies they could not fill, with 28% of those for skilled workers.

“As Congress debates another stimulus package, small employers welcome any additional relief that will provide a powerful fiscal boost as their expectations for the future are uncertain,” said NFIB Chief Economist Bill Dunkelberg. “The COVID-19 pandemic continues to dictate how small businesses operate and owners are worried about future business conditions and sales.”

There is some concern that it could be too much aid on top of the recently passed $900 trillion aid package. But how else do we get the 10 million that lost their jobs back to work that want to work? There is an additional 4 million that have stopped looking for work.

The task at hand must bring back a US and world economy under attack by an enemy that has inflicted far more casualties than any war.

Harlan Green © 2020

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Friday, February 5, 2021

January Employment Disappoints

Popular Economics Weekly

Calculated Risk

The unemployment rate fell by 0.4 percentage point to 6.3 percent in January, while nonfarm payroll employment changed little (+49,000), the U.S. Bureau of Labor Statistics reported today. The US labor market continued to reflect the impact of the (COVID-19) pandemic, which means much more economic aid is needed to offset the damage.

The Calculated Risk red line in graph portrays the damage done by the pandemic in the 10th month of this recession vs. earlier recessions, with 10 million jobs still lost and almost 20 million receiving unemployment benefits of some kind.

In fact, BLS reports the jobs picture began to worsen in November and December. The change in total nonfarm payroll employment for November was revised down by 72,000, from +336,000 to +264,000, and the change for December was revised down by 87,000, from -140,000 to -227,000. With these revisions, employment in November and December combined was 159,000 lower than previously reported.

The report also showed where most of the damage was done and why unemployment benefits must be extended past March for those in the lower-income brackets. Leisure and hospitality lost 61,000 jobs in January due to the pandemic.  In March and April of 2020, leisure and hospitality lost 8.2 million jobs, and then gained about 60 percent of those jobs back.  However, leisure and hospitality lost jobs in December and January, and is now down 3.9 million jobs since February 2020.

But professional firms in tech, science and so forth added 93,000 employees last month to lead the way in hiring. And 23 percent of the employed “teleworked” from home, a sign of future job trends. These data refer to employed persons who teleworked or worked at home for pay at some point in the last 4 weeks specifically because of the pandemic, said the BLS.

Employment fell in almost every other part of the economy. Jobs in leisure and hospitality — restaurants, hotels, casinos, theaters and the like — dropped by 61,000 in January after a massive 536,000 decline in December.

States began to lift business restrictions last month as coronavirus cases began to recede again, but not enough to give a big boost to employment. Retailers shed 38,000 jobs, health-care providers cut 30,000 positions and firms in warehousing and transportation cut payrolls by 28,000.

COVIDtrackingproject-Calculated Risk

Are we through the worst of this pandemic? The COVID Tracking Project (CTP) reports both COVID positive tests and hospitalizations are down sharply in January.

“The good news in COVID-19 data continued this week, as new cases, hospitalizations, and deaths all dropped,” said the CTP. “For the seven-day period running January 28 to February 3, weekly new cases were down more than 16 percent over the previous week, and dropped below one million for the first time since the week of November 5.

“This is still an astonishing number of new cases per week, but far better than the nearly 1.8 million cases reported on the week of January 14. Tests also declined nationally, but by less than 3 percent, nowhere near enough to explain the steep drop in cases,” reported CTP.

Part of the Biden rescue package being debated in congress is $70 billion for COVID-19 testing and a national vaccine program, and increasing the federal, per-week unemployment benefit to $400 while extending it through the end of September.

All of this aid is necessary and more, as I have reported, if we want the recovery everyone is hoping for.

Harlan Green © 2020

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Wednesday, February 3, 2021

Q4 GDP Growth Weakens

 Popular Economics Weekly

Calculated Risk

This Real Gross Domestic Product graph dating from 1959 shows that the US economy in 2020 had its worst contraction since the end of World War II. No surprise given we have the worst COVID-19 infection rates and death totals in the world.

But that doesn’t dim predictions of economists for a ‘Roaring '20's’ recovery this year that matches the recovery from the Spanish flu pandemic of 1918-19, if we get the economic aid that harks back to a more progressive, New Deal, era when government was the solution.

It has taken the coronavirus pandemic to end 40 years of trickledown economics, a Gilded Age that benefited corporate owners rather than their workers. Raising the minimum wage, childcare payments, and aid to state and local governments will benefit those lower-paid, essential workers that are not in the surging stock and bond markets.

The advance estimate of real fourth quarter GDP was 4 percent when adjusted for inflation after the record Q3 jump of 33 percent. But overall GDP still shrank by 3.5 percent last year due to the pandemic shutdowns, which gives an inkling of the task ahead for President Biden in crafting a recovery plan from the worst pandemic in 100 years.

Economist James K. Galbraith said recently in Project-Syndicate, “Biden has correctly billed his plan an “American Rescue Plan,” rather than as a “recovery” or “stimulus” program. If successful, the package will stem the pandemic, stave off a variety of social calamities, and prevent the collapse of state and local government services. Economic reconstruction is important; but it is a separate objective that can be advanced in a second package.”

Biden is asking for $1.9 trillion just to rescue the American economy. If Democrats can pass it without too many cuts, as well as an infrastructure bill that will create millions of new jobs, economic forecasters are predicting even higher GDP growth this year—upwards of 5 to 6 percent.

The New York Fed’s Nowcast predicts a 6.5 percent jump in 2021 Q1 growth. Most of it the prediction comes from an increase in manufacturers’ production and inventories of durable goods, which have been building as nondefense capital goods orders are on a tear, reports the US Census Bureau.

FREDdurablegoods

Businesses are ramping up investments in capital goods that will ensure future growth. Business orders for durable goods such as tools, appliances and new cars rose in December for the eighth month in a row, which should mean a stronger U.S. economic rebound this year.

Why the optimism when Republicans resisted new spending on anything but tax cuts, border walls and defense over the past four years? The COVID-19 pandemic has brought this Gilded Age to a crashing halt, as I said.

The party of Roosevelt won the election with the massive support of younger generations that want what citizens of the other developed countries enjoy—universal health care, a higher minimum wage, better social services, public education, paid vacations—the list goes on and on.

It might even reduce the social unrest and red vs. blue state polarization that has endangered American democracy!

Harlan Green © 2020

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Tuesday, January 26, 2021

What About Another 'Roaring Twenties'?

 Financial FAQs


Could we be returning to the Roaring 20’s; I mean a Roaring 2020’s as the coronavirus pandemic winds down this summer, leading to an explosion of growth after the worst recession since the Great Depression and worst pandemic since the Spanish Flu pandemic of 1918-19?

The International Monetary Fund is hinting at such with its latest forecast. The IMF World Economic Outlook projects global growth at 5.5 percent, which is higher than their previous forecast in October. Global growth will moderate to 4.2 percent growth in 2022, said the IMF in its latest blog post.

“In our latest World Economic Outlook forecast we project global growth for 2021 at 5.5 percent, 0.3 percentage point higher than our October forecast, moderating to 4.2 percent in 2022. The upgrade for 2021 reflects the positive effects of the onset of vaccinations in some countries, additional policy support at the end of 2020 in economies such as the United States and Japan and an expected increase in contact-intensive activities as the health crisis wanes. However, the positive effects are partially offset by a somewhat worse outlook for the very near term as measures to contain the spread of the virus dampen activity.”

The economy grew 42 percent during the 1920s, and the United States produced almost half the world's output because World War I destroyed most of Europe, say the historians. New construction almost doubled, from $6.7 billion to $10.1 billion. Aside from the economic recession of 1920-21, when by some estimates unemployment rose to 11.7 percent (due to the Spanish flu pandemic lockdowns), unemployment in the 1920s never rose above the natural rate of around 4 percent.

We should see a similar rebound from the damage done by COVID-19. The global economy contracted by 3.5 percent in 2020, the worst peacetime contraction since the Great Depression of the 1930s. But it was a short-lived recession, since the economy was at full employment last February at the onset of the pandemic that has killed 2,143,861 worldwide and 421,670 in the U.S., according to the John Hopkins coronavirus tracking center.

“Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens,” said IMF chief economist Gita Gopinath, in a blog post accompanying the updated forecast.

The Biden administration is making a good start with its program to vaccinate 100 million in the first 100 days by opening mass vaccination sites and mandating the increased production of PPE and vaccines with the Defense Production Act.

But the IMF emphasizes this must be a global effort, as poorer countries don’t have as ready access to the PPE supplies and vaccines, which means they will continue to harbor virus outbreaks that could prolong the pandemic.

“The international community must act swiftly to ensure rapid and broad global access to vaccinations and therapeutics,” says the IMF, “to correct the deep inequity in access that currently exists…The health and economic arguments for this are overwhelming. The new virus strains are a reminder that the pandemic is not over until it is over everywhere, and we estimate that faster progress on ending the health crisis will raise global income cumulatively by $9 trillion over 2020–25, with benefits for all countries, including around $4 trillion for advanced economies.”

Need we say more on what is needed to bring us a  new 'Roaring Twenties’?  Let us hope we can keep the peace as well, since the Great Depression and a second World War followed the original Roaring Twenties.

Harlan Green © 2020

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Friday, January 22, 2021

Housing Construction Soars

 The Mortgage Corner

Calculated Risk

As much housing is being built today as in 2006 at the height of the housing bubble. What is going on? People want to move away from cities, where fear of COVID-19 contagion is highest, and work from home to replace empty offices as the digital economy takes over for white collar workers at least.

This looks like a more permanent transformation because Fifth Generation, 5G networks begin to kick in with up to 40 times faster transmission speeds for all kinds of AI connections that will ultimately be able to power factories, as well as offices.

Privately-owned housing starts in December were at a huge seasonally adjusted annual rate of 1,669,000, said the Census Bureau. This is 5.8 percent above the revised November estimate of 1,578,000 and is 5.2 percent above the December 2019 rate of 1,587,000.

Building permits were authorized at an even higher rate. Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,709,000. This is 4.5 percent (±1.4 percent) above the revised November rate of 1,635,000 and is 17.3 percent (±1.8 percent) above the December 2019 rate of 1,457,000.

This is while total existing-home sales,

This is while total existing-home sales, https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 0.7% from November to a seasonally-adjusted annual rate of 6.76 million in December. Sales in total rose year-over-year, up 22.2% from a year ago (5.53 million in December 2019).

"Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic," said Lawrence Yun, NAR's chief economist. "What's even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market."

The demand for more housing will further increase with the expanding 5G networks, as described in a World Economic Forum 2020 White Paper.

“5G will be critical because it will enable unprecedented levels of connectivity, upgrading 4G networks with five key functional drivers: superfast broadband, ultra-reliable low latency communication, massive machine-type communications, high reliability/availability and efficient energy usage. Together, these defining features will transform many sectors, such as manufacturing, transportation, public services and health.”

The WEF estimates that significant economic and social value can be generated by enabling cases activated by 5G. “An IHS Markit study estimates that $13.2 trillion in global economic value will be made possible by 2035, generating 22.3 million jobs in the 5G global value chain alone.”

There is another problem that needs to be tackled, however. The upcoming surge in evictions is on temporary hold until March. Low-income renters are most affected, as a UC Berkeley housing study found more than one million renter households in California alone had lost their jobs. And the US Census Bureau estimated that 1.9 million US tenants were behind on their rents last December.

The moratorium does not cancel out owed back rents, however. But California tenants and landlords are in line to receive some $2.6 billion in rental assistance from the coronavirus aid package approved last month, reports the LA Times. That and the additional unemployment benefits and cash aid will do much to cushion the losses incurred by both tenants and landlords due to the pandemic.

Adequate housing will be problem for years to come, in other words, so building new homes will solve only part of the problem.

Harlan Green © 2020

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