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How Do Consumers Believe the Pandemic Will Affect the Economy and Their Households?

Published by Anonymous (not verified) on Sat, 17/10/2020 - 2:00am in

Olivier Armantier, Leo Goldman, Gizem Koşar, Jessica Lu, Rachel Pomerantz, and Wilbert van der Klaauw

How Do Consumers Believe the Pandemic Will Affect the Economy and Their Households?

In this post we analyze consumer beliefs about the duration of the economic impact of the pandemic and present new evidence on their expected spending, income, debt delinquency, and employment outcomes, conditional on different scenarios for the future path of the pandemic. We find that between June and August respondents to the New York Fed Survey of Consumer Expectations (SCE) have grown less optimistic about the pandemic’s economic consequences ending in the near future and also about the likelihood of feeling comfortable in crowded places within the next three months. Although labor market expectations of respondents differ considerably across fairly extreme scenarios for the evolution of the COVID pandemic, the difference in other economic outcomes across scenarios appear relatively moderate on average. There is, however, substantial heterogeneity in these economic outcomes and some vulnerable groups (for example, lower income, non-white) appear considerably more exposed to the evolution of the pandemic.

Measuring Consumer Expectations

The COVID pandemic, dubbed “The Uncertainty Pandemic” by Harvard economist Kenneth Rogoff, has been accompanied by high and pervasive uncertainty about the future path of the virus and the response to it by policymakers, households, and firms. Here we assess consumers’ views about the future course of the pandemic and about its impact on future household economic decisions and outcomes, drawing on the SCE. Since June 2013 the SCE collects information on the economic expectations and behavior of households.

The SCE is designed to be a nationally representative, internet-based survey of about 1,300 U.S. households. In addition to the monthly core questionnaire, special surveys are fielded at regular frequencies on various topics and are occasionally fielded on an ad-hoc basis to answer policy relevant questions in a timely manner. The analysis in this post is based on data collected as part of two special surveys on the pandemic fielded in June (between June 10-June 30) and August (between August 6‑August 21).

Expectations Regarding the Duration of the Pandemic’s Economic Impact

We start with consumers’ beliefs regarding the expected number of weeks it will take for U.S. economic activity to get back to pre-COVID levels. When asked in June, the average expected number of weeks required for economic recovery was 94 weeks. This average increased to 132 weeks (more than 2 years) in August. Even though there are differences in the expectations of respondents, the increase since June in the expected duration of the economic recovery is similar across demographic groups.

Based on the August survey, 32 percent of the respondents in our sample work from home due to the pandemic. This share rises as high as 40 percent for respondents younger than age 40, and 50 percent for respondents with a college degree or with household incomes over $75,000. When asked about their expectations of the earliest date of a return to their previous work location, employed respondents on average report a 36 percent chance for a return within the next three months, 48 percent for returning between three to twelve months, and a 16 percent chance for returning to the office in more than a year, as indicated in the table below. When compared to the June results, we observe a significant deterioration in expectations of going back to the office in less than 3 months (58 percent chance in June versus 36 percent chance in August).

The June and August surveys also elicit information on whether respondents feel comfortable going to crowded places such as movie theaters, concerts, and airports. In both waves, we observe only around 23 percent of respondents reporting currently feeling comfortable going to such crowded places. As expected, this share goes down for older respondents (14 percent for age 60+). Moreover, when we ask when they think they will start feeling comfortable, respondents in the August survey report an average 45 percent chance for feeling comfortable sometime in the next three to twelve months and 43 percent chance of feeling comfortable in more than twelve months. As indicated in the table below, this reflects a considerable deterioration in the expected chance of feeling comfortable in crowded places within the next three months from June to August (19 percent chance in June versus 12 percent chance in August). Except for younger respondents being significantly more optimistic, these expectations are comparable across race, education, income, homeownership and Census region.

How Do Consumers Believe the Pandemic Will Affect the Economy and Their Households?

Summing up, our results show that most respondents do not see a quick recovery from the pandemic and have grown less optimistic since June about the pandemic’s economic consequences ending in the near future and about the likelihood of feeling comfortable in crowded places within the next three months.

Hypothetical Scenarios

How sensitive do consumers expect their future spending, income, and debt repayment to be to the evolution of the pandemic? To address this question, we took an experimental approach as part of the special SCE survey fielded in August 2020. The basic idea is to test how spending, income, and debt repayment expectations respond to different scenarios for the path of the pandemic. Each SCE respondent was asked to consider three hypothetical scenarios for the possible evolution of the COVID pandemic in the United States over the next six months. Under the “baseline” scenario, the levels of new coronavirus cases, deaths, and restrictions on distancing in the United States (including where the respondent currently lives) all remain exactly the same as they currently are today. The coronavirus cases, deaths, and restrictions on distancing all gradually drop to zero over the next six months in the “good” scenario, whereas they double in the “bad” scenario. For each scenario, we ask the respondents what they think would happen to their monthly household spending, income, their ability to make necessary payments, their employment prospects, and chances of applying for government assistance over the next six months.

As indicated in the table below, respondents expect their monthly spending to be $2,883 on average under the baseline scenario. They expect their spending to increase by 4.6 percent to $3,016 under the good scenario and to decrease by 5.9 percent to $2,714 under the bad scenario. Note that, if taken at face value, the 5.9 percent decrease in spending in the bad scenario (in which COVID cases doubled) can be interpreted as a -6 basis point “COVID elasticity of spending.” That is an increase of 1 percent in COVID-19 cases and deaths results in a 0.06 percentage decrease in household spending. In both scenarios, the dollar and percentage change in spending is larger for high income respondents and for those with a college degree.

As indicated in the table below, respondents on average expect their monthly household income to be $6,811 under the baseline scenario. Respondents only expect a modest increase in their household income of 1.2 percent to $6,896 under the good scenario, and a decrease of 8.1 percent to $6,262 under the bad scenario. In both scenarios, the dollar and percentage change in income is again larger for higher income respondents.

Under the baseline scenario respondents assign an 8 percent chance of missing a minimum debt or rent payment over the next six months, as compared to 5 percent and 10 percent under the good and the bad scenarios, respectively. These differences can be considered fairly modest and lower than one may have expected, especially considering the fairly extreme events the hypothetical scenarios capture. Compared to the baseline scenario, most of the changes in delinquency expectations in the good and bad scenarios are driven by lower income respondents, those under the age of 40, respondents without a college degree, and respondents who experienced a decline in income since the start of the pandemic.

The respondents who are currently employed believe that on average there is a 13 percent chance they may lose their job over the next six months—under the baseline scenario in which levels of new coronavirus cases, deaths, and restrictions on distancing remain the same as they were at the time of the August survey. In contrast, the average probability to lose one’s job is 8 percent in the good scenario and jumps to 19 percent under the bad scenario. Compared to the baseline scenario, most of the differences in expectations in the good and bad scenarios are driven by respondents in the bottom tercile of income.

How Do Consumers Believe the Pandemic Will Affect the Economy and Their Households?

Finally, in the baseline scenario, respondents evaluate the chance that they will apply for an assistance program (such as, food stamps, income assistance, rent or mortgage or other debt repayment assistance programs) over the next six months to be 15 percent on average. The average chance of applying to an assistance program drops to 10 percent in the good scenario and increases to 18 percent in the bad scenario. Compared to the baseline scenario, most of the changes in the good and bad scenarios are driven by respondents in the bottom tercile of income, those below the age of 45, and respondents who self-identify as non-white. In particular, non-white respondents believe there is 29 percent chance that they will apply for an assistance program under the bad scenario. The relatively high likelihood of applying to assistance programs in the different scenarios may contribute to explaining the comparatively low expected delinquency rate sensitivity discussed above.

To sum up, our analysis reveals the importance of both the evolution of the pandemic as well as the continuation of government support programs for household expectations. Labor market expectations appear rather sensitive to the evolution of the pandemic. While our scenarios present fairly extreme differences in the evolution of the COVID pandemic, respondents report moderate responsiveness of their income and spending expectations to the course of the pandemic, and a relatively muted sensitivity for delinquency expectations, which have remained reasonably low and stable throughout the pandemic. There is, however, substantial heterogeneity and some vulnerable groups (for example, lower income, non-white) appear considerably more exposed to the evolution of the pandemic.

The relative insensitivity of delinquency expectations, together with a large sensitivity of expected application rates to government assistance programs, suggest that the forbearance and other assistance programs currently in place have been effective in supporting household financial conditions during the pandemic. It also suggests that their continuation likely would mitigate delinquencies over the coming months.

Olivier Armantierr

Olivier Armantier is an assistant vice president in the Federal Reserve Bank of New York’s Research and Statistics Group.

Leo Goldman

Leo Goldman is a senior research analyst in the Bank’s Research and Statistics Group.

Gizem Koşar

Gizem Koşar is an economist in the Bank’s Research and Statistics Group.

Jessica Lu is a senior research analyst in the Bank’s Research and Statistics Group.

Rachel Pomerantz

Rachel Pomerantz is a senior research analyst in the Bank’s Research and Statistics Group.

Vanderklaauw_wilbert

Wilbert van der Klaauw is a senior vice president in the Bank’s Research and Statistics Group.

How to cite this post:

Olivier Armantier, Leo Goldman, Gizem Koşar, Jessica Lu, Rachel Pomerantz, and Wilbert van der Klaauw, “How Do Consumers Believe the Pandemic Will Affect the Economy and Their Households?,” Federal Reserve Bank of New York Liberty Street Economics, October 16, 2020, https://libertystreeteconomics.newyorkfed.org/2020/10/how-do-consumers-b....




Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Desperate BoJob Repeats the Tories’ Broken Promises

The signs are definitely increasing that Boris may be on his way out. His personal popularity has plunged to the point where a poll of Tory party members has rated him the second most unsatisfactory member of the cabinet. A poll a few weeks ago found that he was less popular than Keir Starmer, the duplicitous leader of the Labour party, who seems far keener on finding reasons to purge the party of genuine socialists and supporters of Jeremy Corbyn than opposing the Conservatives. Rishi Sunak, the current Chancellor of the Exchequer, according to a similar poll a few weeks or so ago is actually far more popular. Zelo Street has published a series of articles speculating that as Boris shows himself to be ever more clueless and incompetent, the Tories and the press are starting to consider his removal and replacement. The Murdoch press has published a series of articles criticising him, while the Heil joined in to give him the same treatment they dished out to Corbyn and Ed Miliband. The rag published an article about Tom Bower’s latest book, which happens to be a biography of BoJob’s father, Stanley. This claims that he once hit BoJob’s mother so hard that he sent her to hospital with a broken nose. Bower’s last book was a biography of former Labour leader Jeremy Corbyn, which cast various aspersions on him. Of course, the Mail has more than a little previous when it comes to attacking politicians through their fathers. It published a nasty little piece a few years ago smearing Ed Miliband’s father, Ralph, as ‘the man who hated Britain’ when Miliband junior was leader of the Labour party. Ralph Miliband was a Marxist intellectual and I think he was Jewish Belgian, who immigrated to this country. He despised the British class system and its elite public schools, but nevertheless joined the army to defend his new homeland during World War II. Which is far more than could be said for the father of the Heil’s former editor, Paul Dacre, who spent the war well away from the front line as the paper’s showbiz correspondent. Reading between the lines of an interview one of the Tory rags published with Michael Gove, Zelo Street suggested that Boris’ former ally was possibly being considered as his successor. But if Johnson does go, it’ll have to be through a coup like that which ousted Thatcher. Former speaker of the House of Commons John Bercow is undoubtedly right: no matter how unpopular Johnson becomes, he won’t leave voluntarily because he’s unaccountable.

So with things looking ominous and the vultures circling, Johnson today gave an upbeat speech in which he promised to build 40 new hospitals, more houses and increase the amount of power generated from green and renewable sources. Mike in his piece about Johnson’s falling popularity includes a Tweet from ‘Russ’, who helpfully points out that Johnson also made the same promise to build 40 hospitals a year ago. And hasn’t done it. He’s allocated £3 billion for their construction, although the real cost of building them is £27 billion. As for his promise to have a greater proportion of this country’s power generated by renewables, like more wind tunnels out in the Severn, we’ve also heard this before. Remember how dodgy Dave Cameron told the British voting public that his would be the greenest government ever and stuck a little windmill on the roof of his house? That lasted just as long as it took for Cameron to get both feet into No. 10. As soon as he was over the threshold he very definitely went back on his promise, giving his support to fracking while the windmill disappeared. Johnson’s promise is no different. It’s another lie from the party of lies and broken electoral promises. Like when Tweezer told everyone she wanted to put workers in company boardrooms. It’s like the Tories’ promises on racism and racial inequalities. After the Black Lives Matter protests, Johnson promised to set up an inquiry into it. Just like Tweezer did before him. All lies, empty lies that the Tories never had any intention of honouring.

And then there was his promise to build more houses. This was fairly bog-standard Thatcherite stuff. Johnson declared that he was going to build more houses so that more people would be able to own their own homes. But this wouldn’t be done by the state. He would do it by empowering people, who would be able to paint their own front doors.

Eh? This seems to make no sense at all. It does, however, repeat some of the points of Thatcher’s rhetoric about homeownership from the 1980s. Thatcher aimed at making Britain a home-owning nation of capitalists. She did by selling off the council houses and passing legislation forbidding councils from building new ones. This was supposed to allow everyone, or at least more people, to own their own homes. Many council tenants did indeed buy their homes, but others had them bought by private landlords. A few years ago Private Eye published a series of articles about the plight of these former council tenants, whose new landlords were now raising the rents to levels they couldn’t afford, or evicting them in order to develop the properties into more expensive homes aimed at the more affluent. And one of the reasons behind the present housing crisis is the fact that many properties are simply too expensive for people to afford. This includes the so-called ‘affordable housing’. This is set at 80 per cent of the market value of similar houses, whose price may be so high that even at this reduced price the affordable houses may be well beyond people’s ability to purchase. Thatcher’s housing policy needs to be overturned. Not only do more houses need to be built, but more genuinely affordable properties and council houses for those, who can only rent. Johnson isn’t going to do any of that. He just repeated the usual Thatcherite rhetoric about people owning their own homes and empowering them against the state. Just as Thatcher said that there was no society, only people and the Tories talked about rolling back the frontiers of the state.

It’s just another set of empty promises. In the clip I saw on the news, Johnson didn’t say how many he’d build, nor who would build them if the state wasn’t. Like the promises to build the hospitals and increase green energy, it’s another promise he doesn’t even remotely mean to keep. Just like all the others the Tories have made.

See also: https://voxpoliticalonline.com/2020/10/06/johnsons-popularity-hits-record-low-but-bercow-says-he-wont-quit-as-hes-not-accountable/

https://zelo-street.blogspot.com/2020/10/bozo-gets-miliband-corbyn-treatment.html

https://zelo-street.blogspot.com/2020/09/murdoch-abandons-bozo.html

Social Housing: the social need and the economic opportunity

Published by Anonymous (not verified) on Fri, 02/10/2020 - 5:56am in

Tags 

Housing, Politics

The unfairness of Joe Hockey’s first budget in 2014  presaged the end of his political career.  If Josh Frydenberg fails to address the need and opportunity for action on social housing will it start his political decline? The Productivity Commission … Continue reading →

Monthly digest on housing affordability and homelessness – Aug/Sept 2020

Published by Anonymous (not verified) on Wed, 30/09/2020 - 5:53am in

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Housing

The following is the latest instalment of a monthly digest of interesting articles, research reports, policy announcements and other material relevant to housing stress/affordability and homelessness – with hypertext links to the relevant source. Like so many, I am deeply … Continue reading →

Why a social housing stimulus is a measure Morrison cannot ignore.

Published by Anonymous (not verified) on Tue, 29/09/2020 - 6:15am in

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Economy, Housing

Given our Prime Minister’s famously well-honed skill of tapping into the public mood, as well as his claims to an economically hard-headed approach to policymaking, you would surely expect a social housing stimulus plan to be front and centre of … Continue reading →

Homelessness in canada could rise due to recession

Published by Anonymous (not verified) on Sat, 26/09/2020 - 2:50am in

I am currently writing a report for Employment and Social Development Canada looking at the long-term impact of the current recession on homelessness. It should be ready by early November.

In the meantime, a teaser blog post I’ve just written on the same topic is available here.

Homelessness in canada could rise due to recession

Published by Anonymous (not verified) on Sat, 26/09/2020 - 2:50am in

I am currently writing a report for Employment and Social Development Canada looking at the long-term impact of the current recession on homelessness. It should be ready by early November.

In the meantime, a teaser blog post I’ve just written on the same topic is available here.

Houses are becoming commodities to buy and sell and not homes.

Published by Anonymous (not verified) on Fri, 25/09/2020 - 5:55am in

Tags 

Housing, Politics

The Property Council and our tame media are obsessed on property prices. Are prices up or down this month? They see property as a commodity  for wealth creation. Housing policy should be about housing as a human right  and for … Continue reading →

First-time buyers: how do they finance their purchases and what’s changed?

Published by Anonymous (not verified) on Wed, 16/09/2020 - 6:00pm in

John Lewis and Fergus Cumming The changing nature of first-time buyers Average first-time buyer (FTB) house prices have risen by 60% over the past 15 years and homeownership has fallen. How did those who bought their first home finance it and how has this changed? i) We find that average incomes of FTBs have risen. … Continue reading First-time buyers: how do they finance their purchases and what’s changed? →

University of Michigan Opens Whites Only Cafe as Anti-Racist Move

This shows just how extreme ideologies of diversity and affirmative can be taken so that they end up looking very much like the old racist institutions of apartheid and segregation they were supposed to combat. A few days ago I caught some of the Conservative sites on YouTube talking about the opening of a cafe for Whites only at the University Michigan. Amazingly, this seems to have been done by their Centre for Social Inclusion, which at least speaks the language of diversity, rather than old style White racial supremacists. The hosts of the American Conservatives YouTube news channel, Timscast, have put up a piece about it, in which they blame White liberal writers on race and racism for this development. Specifically Robin Di Angelo. Di Angelo’s the author of a bestselling book, White Fragility, and has said that she feels uncomfortable in the presence of Blacks. I think her book is supposed to be an expose of White racism and is a piece of polemic aimed at combating anti-Black racism. But the presenters of Timscast decided that she was a racist herself, who really wants Whites and Blacks to be segregated and the creation of such Whites only spaces.

This came just after Donald Trump passed a law banning the teaching of critical race theory in the police and other federal departments. They haven’t been proscribed at right. They can still be taught privately elsewhere. They just can’t be taught in the various organs of the federal state. Sargon of Gasbag, the Sage of Swindon, has put out his video hailing it as a true anti-racist measure. From what I gather, Critical Race Theory teaches that all Whites are racist, and that the American state and its institutions are therefore also racist.

Kimberle Crenshaw

In his video, the man who broke UKIP reads out excerpts from the introduction of Kimberle Crenshaw’s Critical Race Theory, published in 1996. This is an anthology of texts about the theory. It states that it had its origins in the 1970s amongst a group of White Marxist legal scholars, New Left and Counterculture activists in a Conference for Critical Law Studies. This brought together law professors, students and practicing lawyers, who were subsequently called ‘the Crits’. This led to the foundation of Critical Legal Studies. The focus on race and racism emerged following the departure of Derek Bell, a Black law professor, left Harvard. Bell’s students demanded he be replaced by another Black tutor. When the university refused to grant this, they set up an alternative course continuing Bell’s teaching. This was the first institutional use of Critical Race Theory. These Black activists also attacked Critical Legal Studies itself, most of whose members were White, as a site of hierarchy and power. These were the Critical Race Crits, who split from the Marxists on the issue of racism. They were dissatisfied with the Marxists’ explanation of racism as a function or creation of capitalism.

No, this is a Crite from the movie Critters. Not a Crit.

Critical Race Theory and its supporters reject the ideas of colour blindness, integration and assimilation and the mainstream Civil Rights movement, which they believe has been appropriated by liberal ideologies. This includes Martin Luther King’s dictum that a man should be judged on his character, rather than his colour. As part of this, they have also attacked the Supreme Court’s support for a colour-blind attitude to race. They instead turned to radical Black movements like the Black Panthers, advocating the development of Black racial consciousness to attack and undermine the existing racial order.

There’s a clip on YouTube, which has been used by a number of Conservative vloggers like Sargon’s Romanian friend, Vee, which clearly demonstrates the Critical Race Theorists’ own racism towards Whites. This is of a young Black American woman, Ashleigh Shackleford, telling a roomful of Whites that, as White people, they are all racist and nothing they can do will change it. She doesn’t mean to offend them, but they are all demons to her. This attitude isn’t just confined to her. My mother encountered a similar attitude amongst a group of anti-racism activists brought into her school to teach anti-racism following the race riots of 1981/2. They also made unwarranted assumptions based on class and Whiteness. One of them told Mum that she had to be racist, because she was White and middle class. Mum was naturally not impressed, not least because she grew up on a council estate in Bristol. She told the woman that she didn’t know her.

Sargon attacked the Critical Race Theorists’ advocacy of Black racial consciousness by arguing that it also legitimates White supremacy. White racists can use it to argue that, if Black racial consciousness is legitimate, then it must also be for Whites. In fact, the Critical Race Theorists strongly reject and attack any comparison between their attitude and White racism. But Sargon has a point, and it does seem supported by the opening of the Whites only café by Michigan University as a socially inclusive gesture.

Way back in the 1990s, the Financial Times discussed the development of what it called liberal apartheid in a review of a book on the British Empire. The FT complained, if I remember aright, that while the book covered migration and the movement of peoples across the world during the Empire, it said nothing about the reverse colonisation that occurred afterwards. It used this term to mean the immigration to Britain of non-Whites from former colonies. And it used liberal apartheid to describe the various services that are available only to Blacks and other ethnic minorities. It considered these as one of the forces responsible for the increased separation of Whites and Blacks into different communities.

I’ve no doubt that pro-Black anti-racists would angrily reject terms like ‘reverse colonisation’ and ‘liberal apartheid’ because of the comparison they make between non-White immigration and affirmative action and White imperialism and colonisation. But liberal apartheid is a suitable description for some of these policies. For example, New York University has started building Blacks only student accommodation at the request of its Black students, who don’t want to room with Whites. One university somewhere also opened a student centre, that was exclusively for the use of non-Whites, including Blacks, Asians, Hispanics and indigenous Americans. There’s another clip on YouTube of a Black woman telling the Whites that were in there to leave. In Britain there are also Black only housing blocks, at least in London. I’ve no doubt these separate spaces and policies supporting ethnic minorities were set up in response to a genuine need. The Black housing blocks in London were set up because Blacks had trouble getting accommodation. But it is also itself a form of segregation.

And when this policy of creating separate spaces for ethnic groups, who feel marginalised and at risk, is applied to Whites, as now seems to have happened at the University of Michigan, the liberal apartheid of affirmative action looks very much like its old version designed to exclude and marginalise Blacks and people of colour.

And it also shows how bizarre extreme ideologies by Black anti-racists are, that Donald Trump, a racist himself, many of whose supporters are real racists and White supremacists, suddenly appears to be an anti-racist by banning them.

I’m not going to link to them, but here are the titles of the videos I’ve cited if you want to google them on YouTube.

Sargon’s video has the title ‘Major Win for Patriots: Trump Bans Critical Race Theory’.

Vee’s video is ‘What Is Critical Race Theory and Why Did Trump Ban It?’

The Timscast video is ‘Segregation Resurfaces as WHITES-ONLY Cafe Is Opened At a College in the Name of INCLUSION’.

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