Economic Commentary

Home sales storm back in June

Existing home sales soared by 20.7 percent in June as homebuyers rushed back into the housing market post-lockdown. Aside from the extreme lows for April and May, the 4.72 million unit annualized sales pace was still the weakest since September 2012 as low inventories of homes on the market and continued virus concerns dampen sales. Still, given the surge in demand over the past few months, it looks increasingly likely that the bottom in housing activity for this economic downturn is in the rear-view mirror. 

Better economic data, but rising infection rates increase near-term risks

The economic recovery gathered still more steam in June as job gains and retail spending spiked again while the business sector jumped back into expansion. A record drop for real GDP is still expected for the second quarter, but there is a broad consensus that there will be a sharp rebound in the third quarter — which could start a period of above-trend growth that extends for at least a couple of years as the economy heals from the COVID-19 recession. 

Another burst of retail spending

Retail sales jumped again for June, following May’s upwardly revised 18.2 percent record increase, with a strong 7.5 percent rise. These gains erased nearly all of the lockdown-induced declines from March and April as the reopening of state and local economies led to a surge in consumer activity. As in May, improved spending for June was widespread across categories, led by outsized gains in expenditures at restaurants as well as at clothing and furniture stores — sectors that were severely hampered by the economic shutdown.  

More evidence that the economic recovery has begun

A second consecutive record-breaking employment report provided additional evidence that the re-opening of much of the U.S. economy was having strongly positive impacts on job growth and unemployment. Combined with other strong data from the housing/mortgage markets, business activity, and consumer spending, this points to a high likelihood that – barring another downturn due to additional shutdowns from increasing COVID-19 infections – we have seen the bottom of the current recession. 

Rising new coronavirus infections muddies positive economic data

The sharp rise in COVID-19 cases clouded the recovery’s prospects last week even though the economic data were mostly positive. Milestones such as 60,000 new cases per day and passing the three million case watershed dampened optimism surrounding the post-lockdown re-opening of the economy. Still, the economic data showed robust service sector expansion, yet another decline in continuing jobless claims, and a drop in core PPI inflation (but building raw material inflation). While many bumps are expected on the road to recovery, the trend for the economy remains upward. 

Recovery already? More strong data headed by jobs

The labor market continued to rapidly heal from the COVID-19 recession, adding a record 4.8 million jobs for June and far surpassing consensus expectations. While total payroll employment is still down by 14.7 million from the February peak, the gains during the last two months have offset about a third of the March and April declines. Sectors that were hit hardest by the lockdown again led rehiring with leisure and hospitality up by more than two million and retail trade adding 740,000 workers during June.