Beachfront Bargains

Having spent most of my life shuttling between the densest and fourth-densest counties in America, when I finished my tour in city government I thought it would be nice to try out a different lifestyle. So I moved to the East End of Long Island, down the road a piece from where Jackson Pollack did most of his pathbreaking work. My wife had already substantially made the move after her scary and exhausting battle with breast cancer.

Though I still love the city that gave me so much fun, friendship and opportunity, I also love my coastal, exurban environment. Until The Shutdown I continued to spend a lot of time in Manhattan and I can’t wait for this pandemic nightmare to end so I can once again stroll anonymously down Sixth Avenue and dive into a plate of ropa vieja, rice and beans. But as it turned out, my dispersal from the city presaged a Covid-induced flight from the city, and the summer season out here seemed to begin around April 1.

The long-term effects of the pandemic on urban-suburban-exurban residential patterns is a complicated question that I’d like to address carefully at some point, but in a nutshell I’m hopeful that they will generally be positive. In the meantime, the renewed interest in vacation-area real estate gave me a chance to opine, along with some other real estate experts, on one of my favorite topics in this WalletHub feature.

Thoughts on the May Jobs Figures

On June 5, the BLS reported that the national unemployment rate in May dropped to 13.3 percent, from 14.7 percent in April, and that nonfarm employment increased by 2.5 million. The stock market staged a huge rally and the media expressed astonishment. I guess I don’t read enough economic forecasts these days because I was surprised everybody was so surprised.

On May 21 I tweeted:

How can the PPP have committed over $600 billion to firms expected to maintain payrolls, and yet unemployment claims are over 38 million? Either many of those unemployment claims will be withdrawn once the PPP money flows through, or the PPP program has been a complete failure.

The May jobs figures answered my question. The Paycheck Protection Program (PPP) has been at least a partial success. From March 21 through May 30 initial claims for unemployment insurance totaled an astonishing 42.2 million, a number equivalent to about 27 percent of total employment at the beginning of March. But in the meantime, Congress passed the CARES Act, a central feature of which was the PPP. The PPP was intended to limit unemployment during the pandemic shutdown through, essentially, a federal subsidy of business payrolls, as well as to help small businesses survive by providing the liquidity to pay other fixed costs.

The PPP was designed as a loan program, but since the loans are 100 percent forgivable it is, in effect, a grant program. As initially legislated, PPP loans are forgivable if the borrowing firm used 75 percent of the loan for payroll and restored its pre-pandemic employment level by June 30. Through the end of May, 4.5 million PPP loans were approved, totaling $510 billion. However, the program only began taking applications on April 3 and administrative problems caused delays and frustration. Then the program ran out of money and Congress had to enact a new phase of emergency aid to refill it. Money didn’t start flowing to firms in a big way until late April. By then some 28 million Americans had filed for unemployment benefits.

The two criteria for loan forgiveness induced firms with PPP loans to rehire employees who had been laid off; many of those employees probably had already filed for unemployment. Undoubtedly, many firms also recalled workers simply because they wanted to continue operations and the PPP loans enabled them to do so. So it was to be expected that many of the initial unemployment claims were precautionary and, as my tweet suggested, eventually evaporated.

The timing of the rehires, as it relates to the reported unemployment rate, was anyone’s guess. The dip in the May unemployment rate, the survey for which was taken the week of May 10, indicates that the rehiring was relatively rapid. What exactly happens to the unemployment rate in June and July is even more speculative, insofar as Congress, on June 3, passed legislation extending the forgiveness deadline to December 31 (and also lowered the amount of the loan that must be used for payroll maintenance to 60 percent.) So firms are under less pressure to restore their employment to pre-pandemic levels by the end of June. It should not be a surprise if the unemployment jumps up again in coming months, nor should it be a surprise if it stabilizes.

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