More people filed for unemployment than expected during the week ending June 20, with first-time filers totaling another 1.48 million people. This was higher than estimates and still reflects an estimated 16% unemployment rate.
The housing sector was also in the news, with differing results for sales of new and existing homes – read more about that below. We also got the latest data on home price appreciation on single-family homes with conforming loan amounts, as the Federal Housing Finance Agency’s House Price Index, showed that home prices rose 0.2% in April and 5.5% year over year, down from 5.9% in the previous report.
The Latest on Unemployment
Another 1.48 million people filed for unemployment benefits for the first time during the week ending June 20, which was 100,000 more people than anticipated. California (+287K), Georgia (+124K) and New York (+90K) saw the largest gains.
Continuing claims, which measure people continuing to receive benefits, decreased by only 77,000 to 19.5 million people. This figure is backwards looking, so when we add the following two weeks of initial claims, there are roughly 22.5 million individuals receiving benefits. Note that this does not include anyone who returned to work within the last week.
If we factor in a similar number of people who returned to work from the previous week's report, we estimate the unemployment rate to be around 16%. Although there has been a slight improvement in weekly claims, 1.48 million is still a huge number of people who have lost their jobs and are new filers for benefits.
The Skinny on May Home Sales
Existing Home Sales decreased by 9.7% from April to May, slightly worse than the 8.8% decline that was expected. Sales were also 26.6% lower when compared to May of last year.
Inventory remained tight with only 1.55 million units for sale in May. While this was 18.8% lower year over year, the number was 6.2% above the levels seen in April. At the current pace of sales, this represents a 4.8-month supply, below the 6-month level that's considered normal. Low inventory should be supportive of prices, especially with demand remaining strong as evidenced by purchase application volume.
The median home price was reported at $284,600, up 2.3% year over year. Single family sales were down 9.4% from April to May. Condos, however, saw a much bigger drop of 12.8% and a whopping 41% decline from a year ago, confirming that people are looking for standalone homes. First-time homebuyers made up 34% of home sales.
Lawrence Yun, NAR’s chief economist, explained, “Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lock down and hence the cyclical low point. Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”
Meanwhile, sales of new homes rose 16.6% in May, much higher than the 1.6% increase that was expected. Sales were also up 12.7% when compared to May of last year. It should be noted that April’s sales figure was revised lower from 623,000 to 580,000, but even without the revision sales in May were up 8.5%.
Inventory of new homes on the market also remains tight, decreasing from 325,000 to 318,000, while the median new home price increased 4.9% to $317,900.
You may be wondering why sales of existing homes were down significantly while sales of new homes had a nice rebound. The answer is partly due to what each report is measuring. As noted above, May's Existing Home Sales report measured closings in May, meaning those buyers were home shopping in March and April – the worst time for the pandemic.
May's New Home Sales report, on the other hand, measures contracts that were signed in May by people out shopping for homes throughout that month. The increase in states opening in May plus the high demand for housing helps explain the difference between the two reports.
The Scoop on GDP
The final or third look at first quarter GDP was reported at -5%, which was unchanged from the second reading and the third worst reading ever. Remember this is for the first quarter. The second quarter of 2020 will likely be much worse, with economists forecasting a much bigger GDP drop of around 30%.
Meanwhile, the International Monetary Fund projected global growth to be -4.9% in 2020, which is a drop of 2% from their previous forecast in April. Though the IMF projects a rebound of 5.4% in 2021, that will not recoup the loss that's expected in 2020 because the recovery will be starting from a lower level.
The IMF said that $10.7 trillion in fiscal measures have been announced worldwide to fight the pandemic. As a result, global public debt is expected to reach an all-time high, exceeding 101% of GDP in 2020-21. That’s 19 percentage points above a year ago. This increase in global debt slows down the velocity of money and has a downward pressure on rates.
A Quick Update on Inflation
Personal Consumption Expenditures, the Fed’s favored measure of inflation, showed that inflation remains tame, as headline inflation increased 0.1% in May and fell from 0.6% to 0.5% year over year. The Core rate, which strips out volatile food and energy prices, also increased 0.1% in May and remained at 1.0% year over year.
Also of note, personal incomes fell 4.2% in May. Spending, meanwhile, increased by 8.2%, which was likely due to more states opening and the availability of places for people to actually spend money.