Zillow Market Pulse: July 7, 2020

July 7, 2020

Job openings are up, but remain well short of pre-pandemic levels. Confidence in the housing market rose in June. But signs are emerging that the economic recovery is slowing in the face of rising coronavirus case volumes.

• Job openings up, but are nowhere near fully recovered

  • Layoffs fell to 1.8 million in May, after rising to as high as 11.5 million in March.
  • Job openings are down 23% from February.

• Confidence in the housing market was up in June

  • The Fannie Mae Home Purchase Sentiment Index (HPSI) increased 9 points in June from May, to 76.5.
  • More people said it's a good time to buy or to sell than last month.

• Signs are emerging that the economic recovery is slowing

  • The New York Fed's Weekly Economic Index fell last week, the first decline since the outbreak began.
  • The President of the Federal Reserve Bank of Atlanta said the economic recovery is leveling off.

 So what?

The May reading of the Job Openings and Labor Turnover Survey (JOLTS) was the latest piece of evidence that while the labor market improved mightily in the spring, it remains well short of its pre-COVID levels. The planned reopening of most states' economies led to an unexpected increase of 401,000 job openings nationwide. Layoffs plummeted, and more people were hired in the month of May than in any month in the series' history (dating to 2000). But despite the improvements, the report also showed just how far the labor market has to go before full recovery is reached. The 5.4 million job openings in May are well below the pre-pandemic level of 7 million, and would be the lowest number of openings in a month since June 2015 but for a dismal April. Additionally, the number of openings pales in comparison to the estimated number of people unemployed during the month (by one measure, an average of 19.4 million, or about 3.6 people for each open job). And the rate at which people are quitting their job – a measure of confidence in the labor market – remains well below pre-pandemic levels.

Confidence in the housing market is rising, according to Fannie Mae's June National Housing Survey. The share of consumers who said they believe it's a good time to buy a home rose to 61%, while fewer respondents stated that it was a bad time to buy (27%, down from 46% in April). Meanwhile, while almost half of those surveyed (48%) said it was still a bad time to sell a home, a growing fraction (41%, up from 32% in May) said they viewed the prospect of selling as a good idea. The report's headline figure (the Home Purchase Sentiment Index) remains 15 points below where it was this time last year, but recent improvements suggest that confidence in the housing market was rising as the Spring came to a close. The improved outlook appears less-related to increased optimism surrounding mortgage rates (almost twice as many respondents said they think rates will rise in the next twelve months than those saying they believe rates will fall) and more about improved personal economic prospects. A quarter of respondents said their household income is significantly higher than a year ago, compared to 16% who said the opposite – a surprising stat likely explained at least in part by enhanced government financial assistance due to expire at the end of this month.

But this increased housing market activity could very easily slow in the coming months, particularly if the nation continues to struggle to contain the spread of the coronavirus. And more recent data may already be showing signs of a slowdown or even a reversal in broader economic growth. A weekly measure of economic activity from the Federal Reserve Bank of New York fell in the week ending July 4, the series' first weekly decline since mid-March and largely attributed to decreases in both retail sales and consumer confidence. Separately, Federal Reserve Bank of Atlanta President Raphael Bostic said in an interview that the economic recovery is leveling off, in part because of rising case volumes that are discouraging consumer behavior. There are some early signs that housing market activity may also be slowing due to the renewed outbreak. Annual growth in newly pending listings (a proxy for future home sales) has slowed across the nation over the last two weeks, especially in some markets where the coronavirus outbreak has been the most severe. There are likely several factors at play, including the fact that for-sale inventory levels remain historically low. Regardless, there are substantial signals emerging that the economic recovery's momentum is stalling just weeks before key federal assistance programs are due to expire.

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