Zillow Market Pulse: April 16, 2020

April 16, 2020

Roughly 20 million Americans have applied for unemployment insurance benefits since mid-March. Home construction activity fell sharply last month, with steeper pullbacks likely to come. And a key small business relief fund is out of money.

• 5.25 million claims for unemployment insurance were filed last week

  • Continued claims for unemployment — a count of those claiming benefits in weeks beyond their initial filing — rose to a seasonally adjusted figure of almost 12 million, more than double the previous record.
  • Estimates suggest the true U.S. unemployment rate is at least 16%.

• Housing construction levels fell sharply in March

  • Housing starts fell 22.3% in March from February, but remained up 1.4% from March 2019.
  • Permits for new housing fell 6.8% on the month, and more pullbacks are likely coming.

• Relief fund for small businesses is reportedly out of cash

  • Reports emerged today that the ~$350 billion fund is no longer accepting applications.
  • There are about 30 million small businesses in the U.S., employing about 50% of the population.

So what?

A month ago, the idea that 5.25 million (seasonally-adjusted) weekly jobless claims could reasonably be considered "good" news was unthinkable. But here we are, with some taking small solace in the fact that many expected this week's numbers to be even worse than they were. Still, this week's modest beat does little to heal an increasingly bleak outlook for a very sick labor market. Over the last four weeks, roughly 20 million jobless claims have been filed, almost 7 times more than the worst four-week stretch during the Great Recession (3.1 million claims filed). The 12.5 million continued claims is easily the highest number the series has ever recorded, representing about 8% of total nonfarm payrolls in March. With today's release, the market has shed a decade's worth of job growth, and did so at a remarkable pace. And as in previous weeks, it's likely that this figure understates the number of people who require unemployment aid, with gig workers, the self-employed and contractors continuing to struggle with confusion and inconsistencies in states' abilities to extend benefits to those groups.

March's home construction figures were the first "hard" data to shed light on how the home construction has fared in the immediate aftermath of the U.S. pandemic outbreak. A dismal release was largely expected following yesterday's historic plunge in homebuilder sentiment, even though many construction projects were deemed essential work through the month of March. The news was certainly disappointing, though there were portions of the release that offered a bit of surprise. Authorized building permits fell "just" 6.8% on the month, and both starts and permits remain above their levels from this time last year. Sadly, these glimmers of hope will probably be short-lived, as the modest declines in permits likely includes some boosted activity from the early part of March, before the coronavirus truly broke out on U.S. soil. It's unlikely that builder activity will revert to anything close to normal levels any time soon.

Lastly, reports emerged today that the roughly $350 billion in funding allocated to small businesses as part of the CARES act has officially hit its limit. Yesterday, the Small Business Administration announced that they had already approved more than 1.3 million loans, at a value of over $296 billion – very close to the $350 billion limit. It's encouraging that small businesses were able to apply and receive necessary aid, but it's safe to assume that more relief will be necessary in the short-term. Yesterday's decline in retail sales was driven by massive one-month declines in restaurant and clothing retailers, suggesting that many small businesses have seen their revenue decline sharply in the last month. There are about 30 million small businesses in the U.S., employing about half of the working population.

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