Morning Report: 22 million jobs lost in the past month

Vital Statistics:

 

Last Change
S&P futures 2790 15.1
Oil (WTI) 20.13 0.29
10 year government bond yield 0.61%
30 year fixed rate mortgage 3.37%

 

Stocks are higher this morning as the Trump Administration works on how to re-open the economy. Bonds and MBS are up.

 

The Trump Administration is looking to ease the lockdown as it looks like cases have peaked in the US. He is planning to hold a conference call with governors this afternoon and will announce something by the end of the day. Of course it will be up to the states and local governments to make the ultimate decisions for their respective jurisdictions. State and local governments are starting to get starved for cash as sales taxes have fallen off a cliff. In all honesty, if masks and gloves work (and they appear to), then it probably makes sense to have people return to work wearing them. Note that the food supply is at risk for shortages, so that is something the government must work to avoid.

 

Initial Jobless Claims fell to 5.25 million last week. Over the past month, 22 million people have lost their jobs. That is about 34 jobs lost per case of the virus, and 770 per death from the illness.

 

Housing starts fell to 1.216 million. This is down 22% from February, but is actually up 1.4% on a YOY basis. Building permits came in at 1.35 million, which was down 6.8% sequentially, but up 5% on an annual basis. Starts are going to be super-sensitive to local economies. The rumor is that KB Home simply walked away from all their land deposits in Las Vegas.

 

Neel Kashkari is recommending that the big banks raise $200 billion in capital to help buffer against the effects of the recession. Note that Shelia Bair was jawboning the Fed to force the banks to suspend dividends and bonuses, the way most European banks have. Of course the European banks are in much weaker capital positions than the US banks, and the US banks have already suspended share buybacks. Oh, and bonuses are paid at the end of the year, so that is just a throwaway talking point. But bonuses, buybacks, and dividends are kind of an evergreen topic for liberal policy types.

 

The NHMC found that 84% of renters made a full or partial April rent payment. As of a week ago, that number was only 69%. Good news for the apartment REITs.

“We are pleased to see that it appears that the vast majority of apartment residents who can pay their rent are doing so to help ensure that their properties can continue to operate safely and so apartment owners can help residents who legitimately need help,” said Doug Bibby, President of NMHC. “Unfortunately, unemployment levels are continuing to rise and delays have been reported in getting assistance to residents, which could affect May’s rent levels. It is our hope that, as residents begin receiving the direct payments and the enhanced unemployment benefits the federal government passed, we will continue to see improvements in rent payments.”

“Anecdotally, we are hearing that different parts of the industry are experiencing different levels of rent payments,” said David Schwartz, NMHC Chair and CEO Chairman of Chicago-based Waterton. “As you would expect, more expensive Class A properties, whose resident base may be more able to work from home, are reporting much higher percentage of rent payments than operators of more affordable workforce properties whose residents are more likely to have had their incomes disrupted because of the pandemic.”

 

 

Author: Brent Nyitray

Why do you need new bands? Everyone knows rock attained perfection in 1974. It's a scientific fact. - Homer Simpson

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