This morning’s Unemployment Report showed that job layoffs are still coming in strong, with another 2,123,000 initial claims for unemployment made last week. The silver lining to the overall report is that ongoing claims fell from 25 million to 21 million. This means that 4 million people have returned to work as the states have slowly reopened. When you factor in the new claims, the current estimate for the unemployment rate is 14.8%. However, after the 8 week time line employers who took a PPP loan are required to maintain employees expires, we are expecting to see a sharp increase in job losses. That will last at least a few months, so there are still rough times ahead.
Preliminary estimates for first quarter GDP came in at -5%, making this the third worst quarter ever recorded. Considering that this covers the timeline from January 1 – March 31, most of the damage from Covid-19 is not yet considered in the report. Most of the quarter was showing record growth numbers. It was only in the later part of March that the economy really started to fall. Of course, the current estimates for the second quarter are much worse. Since a recession is defined as two consecutive quarters of negative growth, we are certainly in a recession right now.
Given the crack induced stock market growth, there is upward pressure on mortgage interest rates. We will maintain a locking bias.