The Weekly Briefing - February 8th, 2021

The Weekly Briefing – February 8th, 2021

In This Week’s Brief:

  • Behind the Headlines: Jobs Data Disappoints Amidst Persistent Long-term Unemployment Data
  • Construction Prices Continue to Climb
  • Delinquency Rates on Residential and Commercial Mortgages Tick Downward

Behind the Headlines: Jobs Data Disappoints Amidst Persistent Long-term Unemployment Data

The economy added a meager 49,000 jobs last month as evidence of stalling in the labor market continues to grow. The Bureau of Labor Statistics (BLS) also revised downward both the November and December jobs figures to a combined 159,000 fewer gains than previously reported.

Private sector payrolls showed particular weakness last month with a net gain of only 6,000 jobs as more sectors of the economy saw slower employment momentum. For example, both manufacturing and construction posted net job losses after demonstrating resilience for much of the pandemic, while financial activities and professional and business services saw a moderated pace of hiring.

Hiding behind the headlines is the shrinking U.S. labor force. The labor force has decreased by 4.3 million people since the start of the pandemic, contracting by 2.6% from February 2020. Currently, the official U-3 unemployment rate stands at 6.3% after a 40 basis point decline from the prior month. However, had the labor force remained constant, the unemployment rate would be closer to 9.1%. Shadow unemployment also registered a modest decline in January as the U-6 rate, which includes underemployed and discouraged workers, fell 60 basis points to 11.1%.

Meanwhile, long-term unemployment remains a persistent issue. The BLS reports 4.0 million people have been unemployed for 27 weeks or more, which is nearly four times higher than pre-pandemic levels and accounts for 39.5% of the total unemployed. On a more positive note, the number of newly unemployed (less than five weeks) workers, however, has averaged ~2.5 million in recent months, just above the pre-pandemic average.

Total Unemployed Workers by Length of Unemployment (Millions)

Construction Prices Continue to Climb

Prices for construction materials and components rose 0.8% in December on a seasonally adjusted basis, well above the 0.1% increase in overall producer prices and capping a year of above-trend price gains.  The price of construction inputs finished the year approximately 5.3% higher than end-2019 levels, marking the fastest pace of annual growth since 2008, according to the Bureau of Labor Statistics.

Prices for lumber and plywood products registered the largest increases last year due to a mix of supply chain disruptions and higher demand from single-family home builders. After settling into a lower range in November 2020, lumber prices have seen a resurgence over the past few months. Other construction inputs are seeing increases as well with metal prices picking up steam during 2H 2020. Cement and concrete prices, on the other hand, have risen a more modest 2.3% over the past year.

More than half of contractors report that COVID-related staffing disruptions have also increased the cost of construction over the past year while delaying project schedules. Most contractors generally expect demand for their services to decline this year because of reduced state and local government spending, although contractors are more optimistic about demand in the healthcare and warehouse segments.

Pricing for Key Construction Inputs, January 1, 2020 to Present

Delinquency Rates on Residential and Commercial Mortgages Tick Downward

Mortgage delinquency rates continue to edge downward for residential- and commercial-backed loans. Black Knight reports that the delinquency rate for single-family mortgages fell to 6.1% in December, the lowest level since April 2020. And the Mortgage Bankers Associations states that the share of outstanding commercial and multifamily mortgages not current on payments dropped 30 basis points in December to 5.7%.

Most banks expect that the rate of delinquencies and write-offs on mortgages and home equity lines of credit will hold near current levels during 2021, according to a Federal Reserve survey. But a quarter of banks believe distress levels will worsen somewhat over the course of the year.

This spring could prove an inflection point in residential mortgage delinquency trends as more than 2.7 million home mortgages are currently in an active forbearance plan. Approximately 40% of these plans will reach the one-year limit required under the CARES Act in either March or April, according to Black Knight.

Delinquency Status of Commercial & Multifamily Mortgages


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