Jobless Claims at 6-Month Low: Workers filing for jobless benefits jumped by 181,000 last week, placing unemployment back to August-2020 figures. Paired with this struggle is the record levels of Covid-19 infection rates. A view of the current environment compared to recent recessions:
Widening of US Budget Deficit: The federal government recorded a budget deficit of $144 billion in December, bringing the deficit for the first quarter of fiscal year 2021 to $573 billion, or $216 billion wider than for the same period last year, a 61% increase from the same period a year ago. For the full twelve months of 2020, the government logged a $3.3 trillion deficit, which is more than triple the previous year’s shortfall. President-Elect Biden’s recent proposal is not included in the values below.
Rising Mortgage Rates: Mortgage rates increased last week. Bond yields and 10-year Treasury yields tend to move in tandem with mortgage rates. Those yields have been increasing into the new year. Should they continue to rise, it is expected this will put pressure on mortgage rates to rise with them—putting an end to the ultra-low rates that averaged 2.83% for the last six months, according to Freddie Mac.
Housing Sector a Bright Spot for Economy: New home sales dipped in October, but still are held near 14-year highs. Existing home sales continued to strengthen in recent months. This paired with the low mortgage rates of the pandemic amounts to a strong housing recovery, likely buttressing sales and construction into 2021. Though it remains to be seen how this will unfold with weakened household income growth and a chronic shortage of homes for sale (below).
Future Business Trends: Harvard Business Review recently released an article summarizing how the pandemic has altered the landscape for business in general and what trends are expected to ensue. (Click here to read.) As work and personal life have been highly intermingled over the last year, both in physical space or use of time and resources, how the boundaries between work and personal life are honored seem to require revision: mental health support by employers becomes a stronger norm; permissible standards of employee monitoring will become a more immanent concern. Now that employees have more flexibility in where they live, states may vie to attract talent more than the employers themselves, and thereby alter a state’s strategy of tax revenue.