Five economic reasons to be grateful

on Estimated risk per 24.11.2022 11:28:00

Here are five economic reasons to be grateful this Thanksgiving. (Thanks to Neil Irwin who started doing this years ago)

1) The unemployment rate is close to a 50-year low

unemployment rateThe unemployment rate in October was 3.7%. The unemployment rate has dropped from 14.7% in April 2020 (the highest since the Great Depression).

The unemployment rate has decreased from 4.6% a year ago (Oct 2021).

This is just an increase from 3.5% in September – and this corresponds to the lowest unemployment rate since 1969!

2) Low jobless claims.

This chart shows a 4-week moving average of weekly claims since 1971.

Weekly claims last week were 240,000.

The dotted line on the graph is the current 4-week average.

Although weekly claims have risen slightly recently, the 4-week average is close to the lowest level in 50 years.

3) Mortgage debt as a percentage of GDP is much lower than during the housing bubble.

Mortgage debt as a percentage of GDP This graph shows household mortgage debt as a percentage of GDP.

Note that this chart was affected by the sharp decline in GDP in the second quarter of 2020.

Mortgage debt is up $1.46 trillion from its peak during the housing bubble, but as a percentage of GDP is 48.9% compared to its peak of 73.3% of GDP during the housing downturn.

4) Mortgage arrears are at their lowest level since at least 1979.

MBA delinquency by periods

This graph, based on MBA data up to Q3 2022, shows the percentage of non-performing loans by day of delinquency. Mortgage delinquency was at its lowest level since the MBA study began in 1979.

Note. The sharp increase in the 90-day basket in 2020 was due to delinquent loans (classified as delinquent but not reported to credit bureaus).

The share of loans in foreclosure increased year-on-year in the third quarter with the end of moratoriums on foreclosure.

5) Household debt burden is low

Financial obligationsThis graph, based on data from the Federal Reserve, shows the total debt service ratio (DSR) and DSR for mortgages (blue) and consumer debt (yellow).

The household debt service ratio was 13.2% in 2007 and has fallen below 10% now, and the DSR for mortgages (blue) is close to its lowest level in 35 years.

These data indicate that the total household cash flow is in a stable position.

Happy Thanksgiving everyone!