Even with these difficult times, here are five economic reasons to be thankful this Thanksgiving. (Hat Tip to Neil Irwin who started doing this several years ago)
1) Household Debt Burdens are at Record Lows.
Household debt burdens have declined sharply.
The Household debt service ratio (red) was at 13.2% in 2007, and has fallen to a series low of 8.69% in Q2 2020 (most recent data).
This graph, based on data from the Federal Reserve, shows the Total Debt Service Ratio (DSR), and the DSR for mortgages (blue) and consumer debt (yellow).
The consumer Debt Service Ratio (yellow) decreased in Q2 2020, and is near a series low. Note: The financial obligation ratio (FOR) declined in Q2 and is at a series low (not shown).
The DSR for mortgages (blue) is also at a series low (since at least 1980). This ratio increased rapidly during the housing bubble, and continued to increase until 2007.
With low interest rates, and a high savings rate, this data suggests aggregate household cash flow has improved.
2) New Home sales are at a Cycle High.
New home sales were at 999 thousand SAAR (Seasonally Adjusted Annual Rate) in October, and 1.002 million SAAR in September (highest sales rate since 2006).
Sales are up almost four-fold from the cycle low of 270 thousand SAAR in February 2011.
Housing has been a strong sector during the pandemic, including new home sales, existing home sales and housing starts.
3) A Falling Unemployment Rate.
Unfortunately the unemployment rate significantly understates the current situation. Not only are 11 million people unemployed, another 3.7 million have left the labor force since February. And there are 2.3 million additional involuntary part time workers than a year ago
Still, this is significant improvement since April.
4) Falling unemployment claims.
Continued claims decreased to 6.038 million (SA) last week, down from a peak of almost 25 million in May 2020.
This is a huge decline in regular unemployment claims.
Note: There are an additional 9,147,753 receiving Pandemic Unemployment Assistance (PUA) that increased from 8,681,647 the previous week. This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance.
An additional 4,509,284 are receiving Pandemic Emergency Unemployment Compensation (PEUC) that increased from 4,376,847 the previous week. These last two programs are set to expire on December 26th – so there is more disaster relief needed soon.
And finally, thanks to all the infectious disease experts and epidemiologists that have provided guidance on how to mitigate the risks of COVID (washing hands, wearing masks, social distancing, etc).