With GDP growth falling 4.8% in the first quarter of the year, consumer spending dropping to record lows, and unemployment nearing all-time highs, there is a major focus on the economic recovery. As states and counties prepare to reopen, here is what you need to know about the state of the overall economy.
The Fed Stays Active
The Federal Bank continues to use all the tools at its disposal to support the economy at this time; however, Chairman Powell warned about potential solvency problems resulting from shorter term liquidity issues.
He announced that the prime interest rate will remain at zero until the U.S. returns to a state of fuller employment and higher inflation. At this time, the Fed has no intentions of dipping below 0% interest rates.
They have continued to purchase hefty amounts of mortgage-backed securities and treasuries to keep the economy from falling into a deep recession, or even depression. They have not yet indicated how much future spending they will do.
The Treasury Department, however, announced recently that it would borrow at record highs during the second quarter to pay for all the government spending. They also announced an extension on the average length of government debt, and they launched a new 20-year bond on May 20th.
Unemployment Worsens
Historic job losses have been a focal point of economic conversation. The hardest hit industry has, of course, been leisure and hospitality. Some estimates claim that over 25% of restaurants will not reopen because of coronavirus.
For the economy as a whole, there is a bright spot. Over 75% of people who lost their job so far have described it as “temporary” and “not permanent”. This offers a more optimistic image of a return to normalcy as states prepare to reopen.
Additionally, overall jobless claims have dropped from 4.4 million to 3.8 million to 3.2 million in recent weeks. Total jobless claims is now over 33 million, but the 3.2 million is the lowest level since mid-March.
Consumer Activity Falls
Consumer spending in April was much lower than originally predicted. Clothing and accessories were hit the hardest, seeing a drop in activity by 79% from March. Consumer activity at bars and restaurants dropped 30% as well.
The economic decline has also resulted in a decline of inflation levels. The core CPI, which excludes volatile food and energy industries, reported its largest drop ever for the month of April. This level was only 1.4% higher than one year ago, compared to an increase of 2.1% from March.
Looking Ahead
As states begin to reopen, now all 50 states have relaxed social distancing orders to some degree, attention will turn to how well things proceed. Consumer spending, which has struggled significantly will be key in those areas opening on a greater scale.
The Fed will continue to stay active, and investors will remain on their toes for the latest COVID news.
For further information on the loan and real estate market, get in touch with one of the title and escrow specialists at Plymouth Title Guaranty Corporation.
Information accredited to MBSQuoteline.
Please note: The safety of our staff and clients is our highest priority. Effective immediately, Plymouth Title Guaranty Corp. will be taking the following precautions to limit the spread of the COVID-19 virus:
All purchase transactions need to take place at a Plymouth Title Guaranty Corp. closing office
- If a party to the closing is not feeling well, please contact your closer prior to the closing so appropriate precautions can be taken.
- We ask visitors to utilize the restroom in our building upon arrival to thoroughly wash hands before entering our office.
- Only individuals required to sign and/or deliver documents at closings will be allowed in our office. Specifically, closings will be limited to borrower(s), seller(s), agents, and lenders.
- All pens used in the closing will be given to the client after use.
- All closing rooms will be cleaned and disinfected in-between each closing.
- Those picking up checks at our office will be instructed to call our main line and request to speak to a staff member who will make arrangements for delivery to the lobby or parking lot of our office; and
- All staff will refrain from shaking hands before or after closings and ask clients do the same
Please be advised that our staffing may be impacted during this unprecedented event. While we are committed to continuing to provide outstanding service, we ask for your patience in the face of this pandemic.
This is a fluid situation and we will continue to adjust our protocols as necessary while following the CDC guidelines.