The Weekly Briefing - May 11th, 2020

The Weekly Briefing – May 11th, 2020

Insights from the Bridge Research team.

In This Week’s Brief

  • April Jobs Report Dire but Understates Economic Damage
  • Job Losses No Longer Limited to One Corner of the Economy
  • Gen Z and Younger Millennials Bearing the Brunt of Job Losses

Market Notes

April Jobs Report Dire but Understates Economic Damage

The jobs report released by the Bureau of Labor Statistics (BLS) on Friday puts the unemployment rate at 14.7%, the highest level in decades. The BLS noted, however, that large numbers of people appeared to have misstated their status and that the actual unemployment rate is in fact closer to 20.0%. It is BLS policy, however, not to restate this data even when large anomalies are discovered. As bleak as the April jobs report was, however, Federal Reserve Bank of Minneapolis President Kashkari believes, “the worst is yet to come on the job front, unfortunately.” The BLS derives employment figures from surveys conducted before the middle of the month, and unemployment claims have continued to mount since then, albeit at a decelerating pace. Although unthinkable just a few weeks ago, the high unemployment estimate still fails to capture the full breadth of economic distress across the U.S. economy. The official unemployment rate is based on the “U-3” data, but it does not include (1) discouraged workers who have given a job-market related reason for not looking for work, and (2) people who are employed part-time purely for economic reasons (i.e. had hours cut back). These are included in the “U-6” data, shown below.

The “U-6” Chart: Historical Unemployment and Underemployment as a Share of the Labor Force

One silver lining in the report, however, is that 90.0% of those who became unemployed in April describe their job loss as temporary, providing hope that at least a segment of the nation’s labor force will quickly return to work after the economy reopens.

Job Losses No Longer Limited to One Corner of the Economy

While the March jobs report indicated job losses up to that point had been largely limited to leisure and hospitality, it is clear from the April report that every sector of the economy is now feeling the pain of the COVID crisis. Sectors where remote work is more likely to be feasible, such as financial activities and information, experienced the fewest—but still sizeable—job losses. Even government, which is typically more resilient to a downturn, has seen total employment fall by 4.4%, largely as a result of school closures.

Percentage Change in Employment by Industry since February 2020


Gen Z and Younger Millennials Bearing the Brunt of Job Losses

As the economic slowdown deepens, the outsized toll of the COVID crisis on younger workers is beginning to come into focus. A survey by the Pew Research Center conducted in mid-April found that people between the ages of 18 and 29 were the most likely to report that someone in their household had lost a job as a result of COVID-19. They were also the most likely to say someone in their household had seen their hours reduced or wages cut. Young adults’ worsening economic situation could cause household formation to slow through the crisis, which would dampen demand for new housing in the short-term. The share of people in their late 20’s living with their parents surged after the Global Financial Crisis (GFC) as it became more difficult for younger workers to obtain decent-paying jobs, rents increased, and marital rates dropped.
  • The Pew survey also found that those between 18 and 29 were the least likely to have sufficient savings to cover three months of expenses in case of an emergency.
  • Millennial finances have been slower to recover from the GFC compared to older Americans in part because of high student debt levels as well as an inability in the wake of the GFC to capitalize on low stock and home prices. Consequently, many millennials find themselves ill-prepared for the current crisis.

Number of Young Adults (18-34) Living at Home (in thousands)

 


Disclosures and Disclaimers
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.
This analysis contains various forward-looking statements that are not historical in nature. You are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this presentation. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and we cannot guarantee future results or the successful implementation of the strategies discussed in this presentation. We are under no duty to update any of the forward-looking statements after the date of this presentation to conform these statements to actual results. Certain information contained herein has been obtained from published sources, agencies of the U.S. government and from third-parties, including without limitation, market forecasts, market research, publicly available information and industry publications. Although such information is believed to be reliable for the purposes used herein, Bridge does not assume any responsibility for the accuracy or completeness of such information. Similarly, forecasts or market research, while believed to be reliable, have not been independently verified and Bridge does not make any representation as to the accuracy or completeness of such information. All information is provided on an “as is” basis only. By using this information, the reader agrees that Bridge shall not have any liability for the accuracy of the information contained herein, for delays or omissions therein, or for any results based on your use of the information which are not consistent with your objectives. Without limiting the foregoing disclaimers, the information provided herein is not guaranteed to be accurate or complete, nor does Bridge take responsibility for it. The information contained herein has not been audited and Bridge does not guarantee its suitability for any purpose. All information is subject to change and/or withdrawal at any time without notice. Certain information included herein may refer to published indices. Indices that purport to present performance of certain markets or the performance of certain asset classes or asset managers may actually present performance that materially differs from the overall performance of such markets, asset classes or asset managers.
Past performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy. Any research in this document has been procured and may have been acted on by Bridge for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of Bridge or any of its affiliates and no assurances are made as to their accuracy.
This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any Bridge funds and has not been prepared in connection with any such offer.
Copyright 2020, Bridge Investment Group LLC. “Bridge Investment Group” and certain logos contained herein are trademarks owned by Bridge.