Zillow Market Pulse: June 4, 2020

June 4, 2020

An additional 2 million jobless claims were filed last week. The Senate passed a bill allowing small businesses more flexibility for when they need to spend aid money. And two Census reports suggest marked improvements for households and small businesses remain elusive.

• 2.2 million jobless claims were filed last week

  • Almost 25% of the workforce is either receiving or awaiting unemployment benefits.
  • It's likely that the claims numbers are still undercounting the true number of people needing assistance.

• Senate legislation offers more flexibility to small businesses that received government loans

  • The bill allows small businesses 24 weeks to spend the money received through the Paycheck Protection Program (PPP), up from 8 weeks previously.
  • Many businesses remain closed, making the previous deadline infeasible.

• Census surveys outline ongoing business & household strife, but possible signs of improvement

  • The Small Business Pulse Survey suggests businesses are bracing for a longer-than-initially expected recovery, but have reduced layoffs.
  • More than 60% of households in Los Angeles and Riverside have lost employment income since mid-March, according to the Household Pulse Survey.

 So what?

After another week with more than 2 million claims for unemployment, almost a quarter of the nation's workforce is either receiving jobless benefits or are waiting to receive them. Today's report was the eleventh in a row that was twice as bad as the worst week of the Great Recession, throwing some water on any sense of optimism that yesterday's ADP private payrolls report may have conjured up. The downturn in the labor market is showing few, if any, signs of slowing, and because only 36 states are reporting Pandemic Unemployment Assistance figures, it's likely that jobless claims numbers are still being undercounted. The question now is whether these claims are a result of a backlog in people seeking support after being laid off weeks ago, or if they represent a continuing string of employment separations. Neither answer is a good one, although the latter would present the economy with a much larger problem and suggest that the labor market is still shrinking because of business closures. Most are expecting tomorrow's official read of the unemployment rate to be around 20%, if not higher.

The impact of the coronavirus on small businesses has been severe, to say the least: Estimates suggest that a quarter of the nation's small businesses have closed, at least temporarily, in the months since the outbreak began — with restaurants hit particularly hard. While more than $600 billion federal support has been extended to small businesses under the Paycheck Protection Program – which offers forgivable loans of up to $10 million to businesses with 500 or fewer employees – it's become clear in recent weeks that the conditions attached to these loans (which make them forgivable) are unrealistic. Should it become law, the legislation passed by the Senate today would triple the amount of time businesses will have to spend the loan they received through the PPP in order to qualify for full reimbursement. The adjustment will greatly ease the stress on some companies who felt forced to spend the money quickly despite the fact that their businesses have not yet reopened, and should help keep many of these businesses afloat.

The Census Bureau's Small Business Pulse Survey – a weekly survey measuring current conditions and outlook – showed that, on average, small companies are laying off employees less and hiring employees more, respectively, than they have in any week since the outbreak began. Other indicators in the report show similar, faint, signs of hope, but the news wasn't all good. More than 40% of respondents said they believe it will take more than six months for business to return to "normal," compared to 31% at the beginning of May. A separate weekly read from the Census on how households are faring showed similar trends of ongoing strife and faint signs of improvement. Almost half of households (48.1%) have experienced a loss in employment income since the middle of March. Losses in income have been felt particularly hard in the Los Angeles and Riverside metro areas, as well as the state of Nevada, where more than 60% of households have reported losses in income. The report also found that housing insecurity is particularly acute in Miami and Houston, where 43.8% and 39% of respondents, respectively, said they missed housing payments or were worried about making their next one.

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