One Big Thing
Well, its official, the State of California has now backslid into full-on shutdown mode. Yesterday, the governor ordered all indoor restaurants, movie theaters and all bars statewide to close as a result of coronavirus cases once again rising. To add a sprinkling of salt on the wound, the LA Unified and San Diego Unified School Districts announced that they would both not be returning to classrooms in the fall.
Health debate aside, there is absolutely no positive way to spin this from an economic standpoint. California is by far the largest state economy in the US and it is nearly impossible for that economy to get back on its feet with a massive portion of the service sector shuttered and parents unable to work full time with kids at home for school. For those who can afford a nanny and tutors – or private school, this is an inconvenience. For those that cannot, it is a severe economic hardship. It is especially brutal for those businesses and employees who were shut down, re-opened and are now forced to close again.
The bottom line is that this makes an extension of government programs like enhanced unemployment insurance a near certainty. If there was ever any doubt about the programs being extended, this should put an end to it. We are in an election year and it would be political suicide for either party to stand in the way of some sort of relief when hundreds of thousands, if not millions of people have been mandated to leave their jobs. If the feds were bluffing about ending enhanced unemployment benefits, that bluff has now been called.
What I’m Reading
Upward Pressure: The acceleration in ecommerce due to the pandemic is driving even more demand for last mile distribution in urban and more densely populated suburban markets. This ultimately will eventually accelerate the trend towards warehouses that are built up, not out.
Rich Get Richer: The COVID pandemic is a perfect storm for big companies with large balance sheets to grow more dominant while small ones struggle to survive.
Assembly Line: Apartment construction is becoming a new focus in Silicon Valley as startups aim to make the development process look more like a car assembly line than a traditional construction site.
No Place Like Home: The housing market has been soaring of late as a rebound in demand outpaces supply with mortgage rates pinned at historic lows. However, colder fall and winter months typically portend a slowdown which could be worse this year if permanent unemployment continues to rise.
Crystal Ball: Sam Zell is now predicting that a U-shaped recovery will begin sometime this fall but still sees no signs of real price discovery in the market today.
No One is Spared: Better alarm systems and a trend towards people holding less cash has led to a bear market for burglars.
Stage Fright: Historically, the American economy has thrived on the forces of creative destruction – where weaker businesses fail and are replaced by stronger startups with new ideas during times of turmoil. However, during the COVID pandemic, we seem to have lost the stomach for the economic turbulence that comes with it.
Charts of the Day
Source: Mortgage Bankers Association
Source: S&P Global Market Intelligence
Surprise: A gender reveal party ended yesterday with the mother-to-be getting punched in the face by her boyfriend’s brother because Florida.
Protect This House: A British man was detained by police after biting a seagull who he said ‘wanted his McDonalds meal.’
Landmark Links – A candid look at the economy, real estate, and other things sometimes related.
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