The Weekly Briefing - August 10th, 2020

Labor Market Continued to Heal During July, Adding 1.8 Million Jobs U.S. nonfarm employment increased by 1.8 million jobs during July as the economic recovery maintained forward movement despite rising new coronavirus cases. The jobs gains pulled the official U-3 unemployment rate down to 10.2%, an improvement of approximately 4.5 percentage points since April and comparable to the GFC peak of 10.0% in Fall 2009. A meaningful amount of July’s rebound occurred in service-providing sectors, which had suffered the most severe declines during the early weeks of the pandemic. Leisure and hospitality alone accounted for approximately one-third of employment gains with 592,000 net new jobs. Retail trade added another 258,000 jobs, led by clothing and clothing accessories stores. The ISM Services index confirmed the broad-based nature of the service-sector’s expansion as it improved 1.0 percentage point to 58.1—index readings above 50 signal expansionary conditions. Government employment also bounced back strongly in July with payrolls climbing 301,000, but pandemic-related disruptions earlier in the year almost certainly skewed the unusually large July figure. With July’s gains, nonfarm employment is up 9.3 million jobs over the past three months, which represent important steps in the right direction as households across the country seek to regain their financial footing. Much work remains to be done, however, as payrolls remain 12.9 million below February 2020 levels. Total Nonfarm Employment (Thousands)

Concerns About Housing Insecurity Stubbornly High, Especially Among Renters Despite the positive job numbers noted above, many Americans continue to express anxiety about their personal economic situations. The most recent edition of the Census Bureau’s Household Pulse Survey, which was conducted in mid-July, shows 35.2% of respondents expect a member of their household to lose work in the next four weeks, up from 30.9% since mid-June. The Household Pulse Survey similarly shows that concerns about housing insecurity have risen over the past few weeks. Approximately 23.1% of respondents to the most recent survey said they had little to no confidence in their ability to make their next housing payment on time, compared to the 18.6% of respondents who said the same in early June. Housing insecurity is a more pronounced issue among renter households, particularly in the Southeast and select other states. Approximately 34.3% of renters across the U.S. report little to no confidence in making their next housing payment on time, based on the most recent Household Pulse Survey. Even higher shares of renters in several southeastern states, Nevada, New York, and New Jersey say the same. Share of Renters with Little to No Confidence in Making Next Month’s Rent on Time

Construction Investment Dipped in June U.S. construction spending declined at a seasonally adjusted pace of 0.7% in June compared to the month prior as both public and private construction outlays took a modest step back. Private construction spending has now registered four consecutive months of decline and is down 1.9% year-on-year. Residential spending has been one of many factors weighing down the private construction numbers. Both new single-family and new multifamily spending during June came in well below the year-prior figures. However, new home sales have returned to pre-crisis levels, and strong consumer demand amidst a lack of supply is resulting in the months of housing supply contracting to 4.7, which is the lowest reading since 2016. If the pullback on residential construction spending continues, housing shortages will worsen in many major metropolitan areas across the country. The overall slowdown in construction spending comes even as construction activity has been deemed essential and allowed to continue in most major metropolitan areas, and slack demand for materials and labor could cause construction costs to soften. The next release of the Producer Price Index, which will take place tomorrow, should shed some light on where construction costs are headed.

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This is a general analysis of the real estate market prepared by Bridge Investment Group LLC (“Bridge”) and is not related to any specific products or services of Bridge or any affiliate. Sources for statistics and other factual data included herein are maintained by Bridge Research. Such data has not been verified by Bridge and we can give no assurance that it is accurate or complete. Statements contained herein that are nonfactual constitute opinions of Bridge, which are subject to change. Financial projections contained herein are estimates only and are based on assumptions, including assumptions regarding future rent growth, the availability and cost of financing, changes in market capitalization rates, and various micro- and macro-economic trends. No assurance can be given that either the projections or the assumptions will prove to be accurate. Investment in real estate involves substantial risk of loss.

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