The Tri-Cities economy is on the cusp of another economic shock. This one focuses on the federal $600 a week add-on to state unemployment checks that expired on June 30. There will be a replacement. But when and how much isn’t clear and therein lies the potential economic shock. Combined with the state unemployment average of $225 a week, many residents received an average of $825 week, which shored up the local economy during the first phase of the pandemic.
Precise numbers on the total haven’t been posted. But if you take the number of Tri-Cities residents who have filed from unemployment and do the math the federal unemployment add on was just under $8 million a week. That’s almost double the total Social Security payments that roll into the Tri-Cities economy every month.
Some effects will show up immediately because unemployment tends to flow directly into the local economy. Others will happen more slowly and are dependent on when and how much the replacement Congress decides.
One big question is, how will this affect the housing market?
There shouldn’t be too much immediate effect on home sales or prices. According to the Census Bureau and National Association of Realtors, 81.1% of Tennessee homeowners made their latest mortgage payment. Statewide 3.2% of the mortgage payments were deferred, and 15.7% were just missed.
Attom Data Solution’s most recent reports on properties with foreclosure filings showed 242 for the Tri-Cities. Another Attom Report on equity status shows a little over one-in-10 outstanding mortgages in the seven-county region was seriously underwater.
It’s a different story – one that lacks much solid data – for the local housing rental market. Economists are ringing the warning bell that a surge of evictions could turn into a financial crisis. The focus is evictions because it’s though that combined federal and state unemployment has kept the rent checks flowing.
The July Housing Pulse shows 58% of renters in Tennessee are looking at a rental shortfall and possible eviction. And renters are not the only ones affected. Many of the owners of rental properties depend on the rents they receive to pay what they owe on the properties.
There are currently a little over 49,000 non-owner occupied single-family investment properties in Sullivan and Washington Counties. That accounts for 37% of the housing in those counties. Renters are especially vulnerable to economic hits since they pay a higher share of their income on housing than local homeowners.
According to Census data, 32,133 Tri-Cities renters are in what’s called in a housing stressed economic class. That means they pay 30% or more of their income for housing. There are 18,163 homeowners in the same situation.
Lending Tree Chief Economist Tendayi Kapfidze says if Congress does not resume its back up, “This really could be catastrophic, and it extends beyond just the rental industry. It could affect the single-family housing market and the economy as a whole.”
The political sticking point is how much Congress is willing to put into extended unemployment add and when. The current $600 a month is out of the question for Republicans because some were recipients making more from unemployment than when they are working. Republicans say that’s causing some workers to refuse to re-enter the workplace.
The local return to the workplace doesn’t look all that promising, so far. There are signs that the job recovery is sputtering due to the local increase in virus infections.
Yes, employers are hiring, but they have also cut back hours for existing and new employees in an effort to keep their books balanced. From an overall economic perspective, that means a pay cut.
While the economy is beginning to replace some of the 19,000 jobs lost in April, the number of layoffs continues as the monthly ebb-and-flow of jobs is seeing the effects of the recession. Compared to the jobs total at the beginning of the year, the sector that has taken the biggest hit is manufacturing, followed by the leisure and hospital sectors.
Nonfarm jobs in the Tri-Cities are currently at a two-decade low. The unemployment rate decline in June, but it was due to less labor force participation than employment.