Zillow Market Pulse: August 10, 2020

August 10, 2020 

President Trump signed four executive orders to provide economic relief. The labor market continues to struggle despite more jobs coming available. And confidence in the housing market slipped in July.

The President signed four executive orders aimed at offering temporary relief, but challenges remain

• The four orders include a payroll tax deferment, eviction and foreclosure restrictions, student loan payment deferment and enhanced state unemployment benefits
• The orders are likely to be challenged in court and complicate ongoing negotiations for more long-lasting fiscal relief

Job openings rose in June, but the labor market has a long way to go

• According to the June JOLTS report, there were 5.9 million job openings in June, up 518,000 from May.
• The quits rate, which is normally a measure of job market confidence, rose 1.9% in June from May

Confidence in the housing market slipped in July

• The Fannie Mae Home Purchase Sentiment Index fell 2.3 points in July from June
• 53% of respondents believe it's a good time to buy a home, down eight percentage points from June but above May's reading of 52%.

So what?

The apparent intent of the President's executive orders – which include a limitation on evictions and foreclosures, and ask states to pay $400 a week in extra unemployment benefits – would benefit the economy. But the orders come with no shortage of questions regarding their scope, durability, legality and execution. The Executive Orders don't include direct assistance to state and local governments or small businesses. Tax revenues have plummeted in recent months, placing state and local governments' budgets in a severe state of stress, and the small business Paycheck Protection Program expired on Saturday. So, while the executive orders could offer some temporary help for some parties, many unanswered questions about the orders' execution remain.  

Like many reports that have been shared in the past couple months, today's release of the June Job Openings and Labor Turnover Survey (JOLTS) report came with some good news and bad, and likely overstated the underlying health of the labor market. Job openings rose by more than 500,000, and while the number of hires declined, it still sits at the second-highest level in the series' history. Moreover, the uptick in total job separations is due almost entirely to people voluntarily quitting their job rather than being laid off. Quits are viewed as a positive indicator for the labor markets, as it suggests that people are confident in their ability to find better employment than their current role. But the monthly improvements help to mask the larger fact that the labor market in June remained deeply damaged. Quits were down 25% year over year and job openings remain close to 19% below last year's levels. What's more, that increased quits rate could also reflect an uptick in people opting to leave their place of work due to health fears or other personal reasons. Indeed, the idea that so many workers would be so confident in their employment potential to quit their jobs at a time when the unemployment rate is so elevated is difficult to hang your hat on.

 For the first time since April, household confidence in the housing market slipped in July, according to Fannie Mae. The 2.3-point decline in the Fannie Mae Home Purchase Sentiment Index was driven by a marked reduction in the outlook from would-be homebuyers. While the majority of respondents still believe it is a good time to buy a home, the share fell by 8 percentage points in July from June, the same decline as the one from March to April, when people were still grasping what life would look like in the coronavirus pandemic. The decline in home buyer sentiment partially offset an increase in optimism among would-be home sellers. More people think that it's a bad time to sell than a good time, but that gap has shrunk. In May, the difference was 30 percentage points, now it's just three. Perhaps unsurprisingly, younger renters and households making less than $100,000 a year were the least optimistic about home buying conditions at the moment, which could place additional pressure on first-time home buying activity in the coming months. The downtick in home buyer optimism is being attributed in large part to the rising uncertainty presented by increased coronavirus case counts and lapsing fiscal support, but low inventory levels likely contributed as well. So, while the share of people who believe it's a good time to buy a home is up, the momentum that was building in June has reversed.

 

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