The chart above shows monthly headline and those in unemployment claims--Data depicting Main Street America. Wall Street data shows monthly annualized growth in three major indexes through July 17th.
Since the Presidential election is later this year, look for both sides to make an argument on how each support main street. Though there may be valid reasons for the stock price to grow in the backdrop of increasing COVID-19 and never-before-seen unemployed Americans, Wall Street numbers seems out of place. However, no other data point reveal the difference between Main Street and Wall Street America than above data points--reality of different households in the U.S. during the pandemic.
Unless you dig deeper, other data points show a completely different and false picture of Main Street America. Look at these data points, for example:
· Income and Wages: Will show large increases right now, but we know income and wages have been stagnant for years. Over 60% of American live paycheck to paycheck. This number never come up when discussing economic health of the U.S.
· Over half of the American households are participants in the stock market, mainly through their 401K. And % share of those making less than $35,000 a year and/or younger than 35 years old show lower participation rate in the stock market. So, large sections of U.S. households are not getting the benefits of growth in Wall Street.
· Both, for sale and rent, housing data shows a rosy scenario muddying up the reality. Housing takes a chunk of consumer’s income, thus making it one of the most important indicators for the economy.
Ø There has been a disequilibrium in the single family housing market since the Great Recession. It seems artificially created constraints in supply are pushing home prices higher. Also, decrease in mortgage rates to help new home buyers due to tough economic times gets scooped away in the form of higher home prices by new home builders/sellers. Existing home sellers, moving from one home to another, have net zero effect. Further, those behind on payments and on the verge of foreclosures in coming months don’t get mentioned in the housing market discussions.
Ø In the multifamily market, it seems there is no real advocate for renters like there are for the owners and operators. Thus, most of the data and reporting seems to reflect about 12 million investment grade professionally managed apartments out of about 24 million 5+ units in the U.S. The analysts who work with professionally managed apartment data go above and beyond to paint a rosy picture through the media outlets, usually complementing each other’s businesses/agendas. By doing so, they not only hurt consumers (renters) but the supply side (owners and operators) gets harmed with false scenarios as well. So, what’s missing from the larger conversation is the fate of low income renters, who during high unemployment period like right now, could get closer to a homeless situation.
Ø The misinformation in the housing market may not be the fault of the Oligopoly companies who dissipates data in the market place since they are just doing their day to day work to generate revenue for their company. The only time they cross the line is when they start behaving like monopolist and start creating a barriers to entry for newer/similar data providers.
Ø It is important to consume these housing data with caution by different sources. And by the way, it is more prevalent in the multifamily than in the single family market.
During this pandemic, be careful how you consume data. Without proper interpretation, your conclusions might lead in the opposite direction than what data is actually saying. Above are only some examples as there are other data points that currently does not show reality. Very common during the pandemic recovery will be a large drop in the economic data seen due to pandemic during the shutdown will show sharp pick up, breaking all historical records. This will give an artificial exuberance but in reality we will still be way below the pre-pandemic level for most of the economic variables.