Daily Forecast Update: Unemployment, Jobless Claims, Underwater Refinancing

July 2, 2009

By Danielle Hale, Research Economist 

Unemployment Rate, Nonfarm Payrolls, and Earnings

• Unemployment crept up again in June to 9.5 percent from 9.4 percent a month earlier. This is the ninth consecutive month of increases in the unemployment rate. The unemployment rate is lower than analysts had anticipated. Still, this is the highest rate seen since August 1983. In the 1982 recession, unemployment peaked at 10.8 percent, but the economy is structurally different today.
• Nonfarm payrolls were at 131.7 million in June. The change in payrolls, the net number of jobs added or lost, was a loss of 467,000. This is a greater decline than last month’s 322,000 decline but a significant improvement over the six and seven hundred thousand per month losses from November 2008 to April 2009. In total, the economy has lost 6.5 million jobs since the peak of payrolls in December 2007.
• Hourly earnings were unchanged in June, and weekly earnings declined slightly due to a decline in the number of hours worked.

Weekly Jobless Claims

• Weekly initial jobless claims were at 614,000 for the week ending June 27. This is a welcome decline from the previous week and brings the 4-week average to 615,250.

Underwater Home Owner Refinancing

• The U.S. Department of Housing and Urban Development on Wednesday announced an expansion of the Home Affordable Refinance Program. Previously, participants were limited to those mortgage payers who had a loan to value ratio equal to 105 percent or less. The program now allows participation by borrowers who are up to 125% underwater on their mortgage and current on payments.
• NAR has pushed for allowing homeowners who have been making mortgage payments but are unable to take advantage of refinancing into historically low rates because of their upside down situation. This change means that fewer homeowners will face foreclosures. Fewer foreclosures will help stabilize inventory conditions.
• One remaining condition is that in order to be eligible the mortgage must be held by Fannie or Freddie. Roughly half of outstanding mortgages are not Fannie and Freddie.

What does today’s data mean for REALTORS® and consumers?

• Most Realtors® are independent contractors and therefore are not counted in the Establishment Survey that collects information on payrolls. The official unemployment rate comes from a Household Survey. In this survey, households are asked about their employment status and are counted as employed if they did any work for pay or profit during the survey reference week, did at least 15 hours of unpaid work in a family-owned enterprise operated by someone in their household, or were temporarily absent from their regular jobs for sick leave, vacation, or other reasons, whether they were paid or not.. Realtors® who answer that they have been working will therefore be counted as employed even if they have not collected any income in this period.
• The job market remains weak, but declines are occurring at a slower pace than in previous months. The smaller-than-expected jump in the unemployment rate this period coupled with a larger-than-expected jump in payroll job losses is typical in a recession when the two series do not move together as predictably as in normal times. It also implies that the next month's jobless rate will move up much higher to possibly even 10%.
• The lack of growth in earnings is a sign that inflation pressure is not seen in the labor market. This may indicate that a lack of inflation pressure will enable mortgage rates to remain at current, low levels. This is good news for potential buyers and refinancers, especially those who are newly eligible as a result of the change to the Home Affordable Refinance Program.

Daily Forecast Update

• NAR monthly official forecast as of July 1
• GDP Q2: -1.0%
• GDP Q3: +0.2%
• GDP Q4: +1.0%
• Unemployment rate by the end of 2009: 10.5%
• Average 30-year fixed mortgage rate by the end of 2009: 5.4%

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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