The Weekly Briefing - September 28th, 2020

Financial Markets Have Rebounded, but Job Postings Still Have Ground to Recover While U.S. financial markets have bounced back from losses incurred earlier this year when much of the economy shuttered, job postings have slowed as economic conditions softened in recent weeks. New job postings registered consistent improvement during late spring and early summer after bottoming out in April at a 49.3% YOY decline. Since July, however, when new postings reached pre-pandemic levels, they have continued along a largely horizontal trendline. Consequently, total job postings remain down 18.7% YOY. Further improvement in new job postings is needed in order to put those who have been let go back to work and to make up for continued labor market churn. New unemployment claim numbers remain stubbornly high, and nonfarm payrolls still stood at 11.5 million jobs below February levels as of the most recent monthly jobs report. The BLS’ September jobs report, scheduled for release this Friday, should provide a clearer picture of the labor market’s progress towards recovery. Year-over-Year Change in New & Total Job Postings

Pandemic-Related Restrictions Continue to Serve as Headwinds Restrictions implemented several months ago to contain the spread of the novel coronavirus are associated with lower recovery levels in many parts of the U.S. The University of Oxford’s Stringency Index for the U.S., which rates the strictness of lockdown policies on a scale of 0 to 100, has largely held steady in the high 60’s since mid-June after quickly climbing during the early days of the pandemic. The researcher note that the indices are not an evaluation of effectiveness across states, but they offer simple comparisons of government interventions over the past several months. At the regional level, many of the states that adopted stricter lockdowns for longer time periods have tended to experience larger declines in employment, and many of these more stringent states count among the largest. For example, California has the 9th highest daily average Stringency Index score, and job levels there have fallen 11.0%, compared to a 6.8% decrease in jobs across the U.S. Similarly, New York has the 5th highest average rating, while employment in the state has declined 11.1%. At the other end of the spectrum, North Dakota has enacted the least restrictive policies, and job levels there have nearly recovered to the pre-pandemic figure. Change in Employment vs. Average Daily Stringency Index Score

Median Duration of Unemployment Up Sharply The median duration of unemployment for laid off workers has jumped sharply over the past four months after plummeting this spring when the coronavirus outbreak began. This pattern marks a reversal from previous recessions, which took place at a much slower pace and saw businesses lay off workers over a much longer timeframe compared to the pandemic-induced downturn. The lengthening tenure of unemployment represents a potential long-term risk for people eager to return to work. The skillsets of individuals who experience long-term unemployment (typically defined as six months or more) often deteriorate over time because of a lack of use, and these individuals may also find that the needs of the labor market have evolved away from them. Consequently, the long-term unemployed tend to earn lower wages when they do find work and are more likely to drop out of the workforce altogether. Studies have also found a connection between long-term unemployment and negative outcomes for health, children, and communities. These dynamics underscore the importance of sustaining the ongoing recovery and suggest additional fiscal support could pay long-term dividends for both workers and the broader economy, especially if it induces businesses to ramp up hiring more quickly. Median Duration of Unemployment and U-3 and U-6 Unemployment Rates

Housing Market Continues to Demonstrate Strength Since we last checked in on for-sale housing a few weeks back, the single-family housing sector has continued to hum along at a rapid clip, representing a key area of growth for the broader recovery. Data from the National Association of Realtors (NAR) indicates existing home sales rose 2.4% during August to 6.0 million homes, led by a strong sales pace at the upper end of the market. Not to be outdone, new construction sales climbed even more rapidly by 4.8% to the highest level in more than a decade, according to the Census Bureau. Record low mortgage rates have fueled the strong demand for for-sale housing, which in turn has pushed home prices higher. Freddie Mac reports interest rates for a 30-year fixed-rate mortgage average 2.9%, 74 basis points lower than a year prior. And in July, the FHFA pricing index increased 1.0% on a seasonally adjusted basis; the index is up 6.4% YOY. Looking ahead, supply-side pressures are likely to provide continued lift for housing prices as inventory constraints increase. The inventory of homes on the market in August was equivalent to 2.8 months of supply, a full month lower than a year prior. This is a sharp contrast to the GFC, which saw 12.2 months of housing supply at its peak in January 2009. Year-over-Year Change in Existing Home Sales by Price

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.

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