U.S. 2020 Economic Conditions and Commentary Considering COVID-19

Where We Are – September 2020 Observations

This is part one of a series of posts focusing on year-to-date economic conditions in light of the impact of the COVID-19 pandemic.  Want to read more? See part two, part three, part four, part five and part six.

1.  The U.S. Equity Markets and Residential Mortgage Rates and Existing Home Sales

At September 4, the S&P Index closed at 3,426 posting a year-to-date gain of 5% and an increase of nearly 43% since March 18 and at a high for the year. The DJIA closed at 28,133; a year-to date-loss of 3%, however a 41% gain from March 18, the date that most U.S. equity markets hit their 2020 lows. The NASDAQ Composite closed at 11,313, posting a 24% year-to-date gain, and increasing 62% since March 18.

As cited by Bankrate, the current average 30-year fixed mortgage rate average is 2.93%, and the average 15-year fixed is 2.42%.  At March 31, these rates were 3.84% and 3.33% respectively.

According to the National Association of Realtors, existing-home sales continued on a strong, upward trajectory and increase of 24.7% in July (a seasonally-adjusted annual sales rate of 5.86 million compared to June), marking three consecutive months of significant sales gains. The previous record monthly increase in sales was 20.7% in June of this year. Sales as a whole rose year-over-year, up 8.7% from a year ago (5.39 million in July 2019). With the exception of the Northeast experiencing a July decline of 2.8% compared to June, the remaining three major regions attained double-digit, month-over-month increases. Home sales data release for August 2020 is scheduled for Tuesday, September 22, 2020.

Single-family home sales sat at a seasonally-adjusted annual sales rate of 5.28 million in July, up 23.9% from 4.26 million in June, and up 9.8% from one year ago. The median existing single-family home price was $307,800 in July, up 8.5% from July 2019. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 580,000 units in July, up 31.8% from June and equal to a year ago. The median existing condo price was $270,100 in July, an increase of 6.4% from a year ago. Existing-home sales in the West ascended 30.5% to an annual rate of 1,240,000 in July, a 7.8% increase from a year ago. The median price in the West was $453,800, up 11.3% from July 2019.

2.  U.S. Treasury Yields

At September 4, the yield on one-month Treasuries was .09%; and the one-year yield was .13%. Ten-year Treasury bond yields were at .72%, and the 30-year Treasury yield was 1.46. At March 18, 2020, these yields were .04%, and .21%, and 1.18% and 1.77%, respectively.

On January 2 of this year, the yield on one-month Treasuries was 1.53%; with one-year yields at 1.56%. Ten-year Treasury bond yields were 1.88%, and the 30-year treasury yield was 2.33%.

3.  The Current 2020 U.S. Inflation Rate and Comparisons to 2019 and 2018

The annual inflation rate for the United States is 1.0% for the 12 months ended July 2020 as compared to 0.6% previously, according to U.S. Labor Department data published on August 12, 2020. The next inflation update is scheduled for release on September 11, 2020 and will offer the rate of inflation over the 12 months ended August 2020.The annual inflation rate for the United States is 0.6% for the 12 months ended June 2020 as compared to 2.3% for 2019 and 1.9% in 2018.

4.  U.S. Unemployment

As cited by the U.S. Bureau of Labor Statistics on August 27, the July 2020 U.S. unemployment rate was 10.2%. From July 2019 to July 2020, the largest unemployment rate increases occurred in Massachusetts (+13.2 percentage points) and New York (+12.0 points). Nevada, Hawaii, and New Jersey experienced increases more than 10.0 percentage points. The smallest over-the-year rate increases occurred in Kentucky (+1.4 percentage points) and Nebraska (+1.7 points).

Compared to July 2020, the June 2020 U.S. employment rate was 11.1%, decreasing  from 13.3% in May, and 14.7% in April; the March unemployment rate was 4.4% and averaged slightly over 3.5% in the 2020 first quarter.

5.  The U.S. Bureau of Economic Analysis – Consumer Spending

Also on August 27, the U.S. Bureau of Economic Analysis reported the below statistics pertaining to consumer spending, or personal consumption expenditures (PCE), which is the increase in the value of the goods and services purchased by, or on the behalf of, U.S. residents. At the national level, BEA publishes annual, quarterly, and monthly estimates of consumer spending.

Within goods sold, the leading contributor to the increase (or decrease, see the above table) was spending for new motor vehicles, based primarily on unit sales from Ward’s Automotive Sales Report. Within services, the leading contributors to the increase were spending for health care as well as food services and accommodations. Within health care, both hospital and outpatient services increased, based on volume data for hospital services and outpatient visits as well as credit card data. Spending for food services and accommodations was based on Census Monthly Retail Trade Survey data and Smith Travel Research data.

For individual consumers, personal outlays increased $270.6 billion in July. Personal saving was $3.19 trillion in July and the personal saving rate -- personal saving as a percentage of disposable personal income -- was 17.8%. In our next edition of “Economic Indicators and Developments” we will further describe U.S. consumer spending and trends observed, for the period March through September 2020.