AuthorTopic: 🦠 Economic Effect of Coronavirus  (Read 7102 times)

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🦠 Economic Effect of Coronavirus
« on: March 12, 2020, 01:12:01 AM »
Kickoff article for this thread.

RE

https://www.cnbc.com/2020/03/12/coronavirus-impact-on-global-economy-financial-markets-in-6-charts.html

6 charts show the coronavirus impact on the global economy and markets so far

[html]

 

World Economy

6 charts show the coronavirus impact on the global economy and markets so far

Published Wed, Mar 11 20207:34 PM EDT
Key Points
  • The new coronavirus, which first emerged in the Chinese city of Wuhan last December, has infected more than 110,000 people in at least 110 countries and territories globally, according to the World Health Organization.
  • The virus outbreak has become one of the biggest threats to the global economy and financial markets.
  • Major institutions and banks have cut their forecasts for the global economy, with the Organisation for Economic Co-operation and Development being one of the latest to do so.
  • Meanwhile, fears of the coronavirus impact on the global economy have rocked markets worldwide, with stock prices and bond yields plunging.

The ongoing spread of the new coronavirus has become one of the biggest threats to the global economy and financial markets.

The virus, first detected in the Chinese city of Wuhan last December, has infected more than 110,000 people in at least 110 countries and territories globally, according to the World Health Organization. Of those infected, more than 4,000 people have died, according to WHO data.

China is where majority of the confirmed cases are — more than 80,000 infections have been reported in the mainland so far. To contain the COVID-19 outbreak, Chinese authorities locked down cities, restricted movements of millions and suspended business operations — moves that will slow down the world’s second-largest economy and drag down the global economy along the way.

To make things worse, the disease is spreading rapidly around the world, with countries like Italy, Iran and South Korea reporting more than 7,000 cases each. Other European countries like France, Germany and Spain have also seen a recent spike beyond 1,000 cases.

https://image.cnbcfm.com/api/v1/image/106426887-gettyimages-1198567273.jpg?v=1583466070&w=750&h=422'[/url]); background-size: cover;">
VIDEO11:45
What the coronavirus means for business

“From an economic perspective, the key issue is not just the number of cases of COVID-19, but the level of disruption to economies from containment measures,” Ben May, head of global macro research at Oxford Economics, said in a report this week.

“Widespread lockdowns such as those imposed by China have been enacted in some virus hotspots,” he said, adding that such measures — if taken disproportionately — could induce panic and weaken the global economy even more.

Fears of the coronavirus impact on the global economy have rocked markets worldwide, plunging stock prices and bond yields.

Here are six charts that show the impact the outbreak has had on the global economy and markets so far.

Downgrades in economic forecasts

The outbreak has led major institutions and banks to cut their forecasts for the global economy. One of the latest to do so is the Organisation for Economic Co-operation and Development.

In a March report, the OECD said it downgraded its 2020 growth forecasts for almost all economies.

Chart: OECD GDP forecasts 200311

China’s gross domestic product growth saw the largest downgrade in terms of magnitude, according to the report. The Asian economic giant is expected to grow by 4.9% this year, slower than the earlier forecast of 5.7%, said OECD.

Meanwhile, the global economy is expected to grow by 2.4% in 2020 — down from the 2.9% projected earlier, said the report.

Slowdown in manufacturing activity

The manufacturing sector in China has been hit hard by the virus outbreak.

The Caixin/Markit Manufacturing Purchasing Managers’ Index — a survey of private companies — showed that China’s factory activity contracted in February, coming in at a record-low reading of 40.3. A reading below 50 indicates contraction.

Chart: Virus impact manufacturing 200311

Such a slowdown in Chinese manufacturing has hurt countries with close economic links to China, many of which are Asia Pacific economies such as Vietnam, Singapore and South Korea.  

Factories in China are taking longer than expected to resume operations, several analysts said. That, along with a rapid spread of COVID-19 outside China, means that global manufacturing activity could remain subdued for longer, economists said.

Services contraction

The virus outbreak in China has also hit the country’s services industry as reduced consumer spending hurt retail stores, restaurants and aviation among others.  

The Caixin/Markit Services PMI for China came in at just 26.5 in February, the first drop below the 50-point level since the survey began almost 15 years ago.

Chart: Virus impact services 200311

China is not the only country where the services sector has weakened. The services sector in the U.S., the world’s largest consumer market, also contracted in February, according to IHS Markit, which compiles the monthly PMI data.

One reason behind the U.S. services contraction was a reduction in “new business from abroad as customers held back from placing orders amid global economic uncertainty and the coronavirus outbreak,” said IHS Markit.

Declining oil prices

A reduction in global economic activity has lowered the demand for oil, taking oil prices to multi-year lows. That happened even before a disagreement on production cuts between OPEC and its allies caused the latest plunge in oil prices.

Analysts from Singaporean bank DBS said reduced oil demand from the virus outbreak and an expected increase in supply are a “double whammy” for oil markets.

Chart: Brent/WTI futures 200311

China, the epicenter of the coronavirus outbreak, is the world’s largest crude oil importer.

“The spread of the virus in Italy and other parts of Europe is particularly worrying and will likely dampen demand in OECD countries as well,” the DBS analysts wrote in a report.

Stock market rout

Fear surrounding the impact of COVID-19 on the global economy has hurt investor sentiment and brought down stock prices in major markets.

Chart: Virus impact stocks 200311

Cedric Chehab, head of country risk and global strategy at Fitch Solutions, said there are three ways the coronavirus outbreak could work its way through sentiment in markets.

“We have identified three channels through which the COVID-19 outbreak was going to weigh on markets so that’s the slowdown in China, the slowdown from domestic outbreaks … and the third channel was financial markets stress,” he told CNBC’s “Street Signs Asia” this week.

Lower bond yields

Concerns over the global spread of the new coronavirus has also driven investors to bid up bond prices, resulting in yields in major economies to inch lower. U.S. Treasurys, which are backed by the American government, are considered safe haven assets that investors tend to flee to in times of market volatility and uncertainty.

Yields on all of the U.S. Treasury contracts fell below 1% in the past week — a development not seen before. The benchmark 10-year contract also touched its historic low of around 0.3%. 

Chart: Virus impact bond yields 200311

Such compression in U.S. Treasury yields could prompt the Federal Reserve to cut interest rates once again, several analysts said. The U.S. central bank made an emergency cut of 50 basis points last week, bringing its target funds rate to 1% to 1.25%.

“We believe that the Fed is cognizant that it has limited policy space for conventional cuts today versus past recessions, and will look to move more aggressively and ahead of market expectations to extract the maximum efficacy from its rate cuts,” strategists at Bank of Singapore wrote in a note.


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https://www.cnbc.com/2020/03/16/millions-of-americans-could-lose-their-jobs-in-a-coronavirus-recession.html

Millions of Americans could lose their jobs in a coronavirus recession. Many won’t get severance pay
Published Mon, Mar 16 202010:00 AM EDTUpdated Mon, Mar 16 202012:06 PM EDT
Greg Iacurci    @GregIacurci


Key Points

    The typical post-World War II recession has seen the U.S. unemployment rate increase about 2 to 2.5 percentage points.
    That would translate to about 3.5 million jobs being lost in today’s environment, according to David Wilcox, a senior fellow at the Peterson Institute for International Economics.
    Companies aren’t required by federal law to pay severance to employees they lay off. Those that do have widely diverging pay practices.

GP: layoffs laid off unemployment man with box
Daniel Grill | Tetra Images | Getty Images

The odds of slipping into a recession are increasingly likely as the global coronavirus outbreak puts acute stress on the U.S. economy. That could be bad news for American workers, who may lose jobs by the millions in a downturn.

For those workers who don’t receive severance pay, the financial impact could be especially devastating.

“It’s really hard to predict how it’s going to play out,” said Wayne Outten, founder and chair of Outten & Golden, an employment law firm in New York, of the coronavirus fallout. “The ripple effect can be dramatic in so many different industries.”

The coronavirus, which causes a disease officially known as COVID-19, has spread rapidly around the globe since it originated in China late last year. More than 169,000 people have been infected worldwide, and more than 6,500 have died.

Financial markets have cratered. American life has come to a screeching halt, as schools and cultural institutions have closed, sports leagues have suspended their seasons, major events have been canceled and state officials have moved to ban large gatherings. Officials from major cities like New York have ordered bars and restaurants to close to limit community spread.

Economic cracks are beginning to emerge. Small-business owners are starting to report supply chain problems and lost sales. The travel industry is reeling. Big oil and gas companies are slashing spending and cutting dividends amid a plunge in crude prices. Consumer spending has fallen as Americans pull back from their daily routines.

The coronavirus fallout has been so dramatic that many economists think the U.S. is headed for a recession. Some economists believe the recession has already begun.

“I wouldn’t be one bit surprised if when we look back at the data, it is decided ... that the recession started in March,” Blinder, a former Federal Reserve vice chairman and now a professor at Princeton, told CNBC’s “Squawk Alley.”
Yellow Dog Productions
Financial backstop lacking

Some reports have emerged that layoffs have already begun in businesses across the country.

Many workers don’t have an adequate financial backstop in layoff situations, experts said.

Half of U.S. adults expected to be living paycheck to paycheck this year and 53% did not have an emergency fund that covers at least three months of expenses, according to a financial planning survey conducted prior to the coronavirus outbreak by First National Bank of Omaha in Nebraska.

Federal law doesn’t require American companies to pay severance in the event of layoffs, leaving it up to the discretion of business owners.
It’s really hard to predict how it’s going to play out.
Wayne Outten
founder and chair of Outten & Golden

A new law signed earlier this year made New Jersey the first state to require large employers to pay severance during mass layoffs.

The state mandates businesses pay a week of severance for each year of service, and that employers give 90 days’ notice — more than the federally mandated 60 days for some types of businesses. It applies to businesses with 100 or more full- or part-time workers laying off at least 50 people.

A large share — 90% — of businesses pay some type of severance to their employees, according to a 2019 survey conducted by Willis Towers Watson. However, that figure masks wide variations in how employers treat different types of workers.

For one, while some companies may pay several weeks of severance, others have more lax policies.
VIDEO05:11
Global coronavirus cases now exceed 135,000—Four experts on what happens next

More than half of businesses — 56% — also don’t extend severance pay to all employees, according to a survey from RiseSmart, a human resources consulting firm.

Most of the benefits tend to go to higher-ranking employees instead of rank-and-file workers. Around 40% of officers, senior executives and managers are eligible for severance, whereas that’s only true for 19% of administrative and clerical workers, according to RiseSmart.

Nearly 40% of companies also require at least a five-year tenure for workers to qualify for any type of severance benefit, RiseSmart found.

More from Personal Finance
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And while the vast majority of companies pay some sort of severance to their full-time salaried employees, that’s only true for half of hourly part-time employees and three-quarters of hourly full-time workers, according to Willis Towers Watson.

“I think the odds are now heavily weighted toward there being a recession,” according to David Wilcox, a senior fellow at the Peterson Institute for International Economics. “That’s a not a sure thing at this point, but I think it’s better than an even-odds bet.”

To be sure, government officials are trying to head off economic disaster. President Donald Trump on Friday declared a state of emergency, which frees up financial resources to assist Americans affected by the outbreak.
VIDEO04:18
Recession hasn’t fully been priced in, yet, says economist

The Federal Reserve slashed interested rates to zero over the weekend in an attempt to limit the economic damage — a measure not taken since the 2008 financial crisis. The House of Representatives passed a bill early Saturday morning aimed at offering aid to individuals struggling financially due to the coronavirus crisis. The Senate hasn’t yet scheduled a vote on the bill, which includes provisions around expanded unemployment insurance and paid sick leave.

New York Gov. Andrew Cuomo said Friday that the state would waive the seven-day waiting period for unemployment insurance. He also told utilities not to cut off electricity, gas or water service to those unable to pay their bills.
3.5 million jobs

The typical post-World War II recession has led the unemployment rate to increase about 2 to 2.5 percentage points, Wilcox said.

An economic downturn due to the coronavirus would put an abrupt end to the longest-running expansion in U.S. history. If it were like an average recession, it would translate to a roughly 6% unemployment rate (given today’s 3.5% rate, which is near 50-year lows).
VIDEO05:50
What is a pandemic?

That would mean about 3.5 million lost jobs, Wilcox said.

Recessions are often defined as two consecutive quarters of negative growth in gross domestic product, a measure of the country’s output.

During the country’s last recession — the Great Recession, the worst downturn since the Great Depression — about 8 million Americans lost their jobs.

Job loss during recessions doesn’t all come via layoffs, Wilcox said.

And rather than reducing the size of their workforce, businesses could instead cut employees’ hours and overtime pay. That approach could still strain workers’ finances but wouldn’t leave them jobless.
Uneven impact

Recessions don’t impact Americans uniformly — workers in certain industries, such as hospitality, restaurants and food services, which tend to employ many younger workers under 40, are more likely than others to be laid off in the event of recession, according to Carter Price, a senior mathematician at the Rand Corp.

Minorities and Americans with less education also tend to lose their jobs with greater frequency during recessions, Wilcox said.

“The economic cost, the burden of a recession, is very unequally distributed,” he said.
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Millions of Americans could lose their jobs in a coronavirus recession. Many won’t get severance pay
Published Mon, Mar 16 202010:00 AM EDTUpdated Mon, Mar 16 202012:06 PM EDT
Greg Iacurci
@GregIacurci
Key Points

    The typical post-World War II recession has seen the U.S. unemployment rate increase about 2 to 2.5 percentage points.
    That would translate to about 3.5 million jobs being lost in today’s environment, according to David Wilcox, a senior fellow at the Peterson Institute for International Economics.
    Companies aren’t required by federal law to pay severance to employees they lay off. Those that do have widely diverging pay practices.

GP: layoffs laid off unemployment man with box
Daniel Grill | Tetra Images | Getty Images

The odds of slipping into a recession are increasingly likely as the global coronavirus outbreak puts acute stress on the U.S. economy. That could be bad news for American workers, who may lose jobs by the millions in a downturn.

For those workers who don’t receive severance pay, the financial impact could be especially devastating.

“It’s really hard to predict how it’s going to play out,” said Wayne Outten, founder and chair of Outten & Golden, an employment law firm in New York, of the coronavirus fallout. “The ripple effect can be dramatic in so many different industries.”

The coronavirus, which causes a disease officially known as COVID-19, has spread rapidly around the globe since it originated in China late last year. More than 169,000 people have been infected worldwide, and more than 6,500 have died.

Financial markets have cratered. American life has come to a screeching halt, as schools and cultural institutions have closed, sports leagues have suspended their seasons, major events have been canceled and state officials have moved to ban large gatherings. Officials from major cities like New York have ordered bars and restaurants to close to limit community spread.

Economic cracks are beginning to emerge. Small-business owners are starting to report supply chain problems and lost sales. The travel industry is reeling. Big oil and gas companies are slashing spending and cutting dividends amid a plunge in crude prices. Consumer spending has fallen as Americans pull back from their daily routines.

The coronavirus fallout has been so dramatic that many economists think the U.S. is headed for a recession. Some economists believe the recession has already begun.

“I wouldn’t be one bit surprised if when we look back at the data, it is decided ... that the recession started in March,” Blinder, a former Federal Reserve vice chairman and now a professor at Princeton, told CNBC’s “Squawk Alley.”
Yellow Dog Productions
Financial backstop lacking

Some reports have emerged that layoffs have already begun in businesses across the country.

Many workers don’t have an adequate financial backstop in layoff situations, experts said.

Half of U.S. adults expected to be living paycheck to paycheck this year and 53% did not have an emergency fund that covers at least three months of expenses, according to a financial planning survey conducted prior to the coronavirus outbreak by First National Bank of Omaha in Nebraska.

Federal law doesn’t require American companies to pay severance in the event of layoffs, leaving it up to the discretion of business owners.
It’s really hard to predict how it’s going to play out.
Wayne Outten
founder and chair of Outten & Golden

A new law signed earlier this year made New Jersey the first state to require large employers to pay severance during mass layoffs.

The state mandates businesses pay a week of severance for each year of service, and that employers give 90 days’ notice — more than the federally mandated 60 days for some types of businesses. It applies to businesses with 100 or more full- or part-time workers laying off at least 50 people.

A large share — 90% — of businesses pay some type of severance to their employees, according to a 2019 survey conducted by Willis Towers Watson. However, that figure masks wide variations in how employers treat different types of workers.

For one, while some companies may pay several weeks of severance, others have more lax policies.
VIDEO05:11
Global coronavirus cases now exceed 135,000—Four experts on what happens next

More than half of businesses — 56% — also don’t extend severance pay to all employees, according to a survey from RiseSmart, a human resources consulting firm.

Most of the benefits tend to go to higher-ranking employees instead of rank-and-file workers. Around 40% of officers, senior executives and managers are eligible for severance, whereas that’s only true for 19% of administrative and clerical workers, according to RiseSmart.

Nearly 40% of companies also require at least a five-year tenure for workers to qualify for any type of severance benefit, RiseSmart found.

More from Personal Finance
Mnuchin may suspend student loan payments amid coronavirus
Wharton uses coronavirus pandemic as a learning opportunity
What to ask before making any investment moves as market falls

And while the vast majority of companies pay some sort of severance to their full-time salaried employees, that’s only true for half of hourly part-time employees and three-quarters of hourly full-time workers, according to Willis Towers Watson.

“I think the odds are now heavily weighted toward there being a recession,” according to David Wilcox, a senior fellow at the Peterson Institute for International Economics. “That’s a not a sure thing at this point, but I think it’s better than an even-odds bet.”

To be sure, government officials are trying to head off economic disaster. President Donald Trump on Friday declared a state of emergency, which frees up financial resources to assist Americans affected by the outbreak.
VIDEO04:18
Recession hasn’t fully been priced in, yet, says economist

The Federal Reserve slashed interested rates to zero over the weekend in an attempt to limit the economic damage — a measure not taken since the 2008 financial crisis. The House of Representatives passed a bill early Saturday morning aimed at offering aid to individuals struggling financially due to the coronavirus crisis. The Senate hasn’t yet scheduled a vote on the bill, which includes provisions around expanded unemployment insurance and paid sick leave.

New York Gov. Andrew Cuomo said Friday that the state would waive the seven-day waiting period for unemployment insurance. He also told utilities not to cut off electricity, gas or water service to those unable to pay their bills.
3.5 million jobs

The typical post-World War II recession has led the unemployment rate to increase about 2 to 2.5 percentage points, Wilcox said.

An economic downturn due to the coronavirus would put an abrupt end to the longest-running expansion in U.S. history. If it were like an average recession, it would translate to a roughly 6% unemployment rate (given today’s 3.5% rate, which is near 50-year lows).
VIDEO05:50
What is a pandemic?

That would mean about 3.5 million lost jobs, Wilcox said.

Recessions are often defined as two consecutive quarters of negative growth in gross domestic product, a measure of the country’s output.

During the country’s last recession — the Great Recession, the worst downturn since the Great Depression — about 8 million Americans lost their jobs.

Job loss during recessions doesn’t all come via layoffs, Wilcox said.

And rather than reducing the size of their workforce, businesses could instead cut employees’ hours and overtime pay. That approach could still strain workers’ finances but wouldn’t leave them jobless.
Uneven impact

Recessions don’t impact Americans uniformly — workers in certain industries, such as hospitality, restaurants and food services, which tend to employ many younger workers under 40, are more likely than others to be laid off in the event of recession, according to Carter Price, a senior mathematician at the Rand Corp.

Minorities and Americans with less education also tend to lose their jobs with greater frequency during recessions, Wilcox said.

“The economic cost, the burden of a recession, is very unequally distributed,” he said.
VIDEO06:50
Save As Many As You Can

Offline RE

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Color me not surprised.  ::)

RE

https://www.vox.com/2020/3/17/21183388/coronavirus-paid-sick-leave-family-covid-19

Millions of American workers are left out of the coronavirus paid leave bill

Republicans have insisted on changes that would leave out even more workers.

By Anna North Mar 17, 2020, 4:20pm EDT

Construction workers at Capitol Hill in Washington, DC, in October 2019. Andrew Caballero-Reynolds/AFP via Getty Images

One of the biggest problems facing the United States during the coronavirus pandemic is a lack of paid leave for workers.

Even though health officials recommend that anyone who feels sick stay home from work to help slow the spread of the virus, many Americans risk losing pay — or their jobs — if they stay home. And with schools and daycare centers closed across the country, many parents have few job protections if they take time off to care for their kids.

Congress aimed to fix that this week with the Families First Coronavirus Response Act, which was supposed to help workers across the country take care of themselves and their loved ones in this time of national crisis. President Trump even praised the bill on Saturday, citing “good teamwork” between Democrats and Republicans.

But after amendments by Republicans on Monday, the bill could leave out millions of Americans who work for small businesses. The amendments also limited paid family leave to parents dealing with school closures — leaving out people who need to stay home because a family member was exposed to the virus or is displaying symptoms.

Overall, the bill — which is expected to pass in the Senate — may solve some of the glaring problems with the American social safety net that the coronavirus crisis has exposed. But the fact that so many workers and situations aren’t covered “adds up to a giant individual health and financial security risk, as well as a giant community health risk,” Vicki Shabo, a senior fellow for paid leave policy and strategy, at the New America Foundation’s Better Life Lab, told Vox.

As much as health experts and government officials are telling Americans to stay home right now to avoid spreading the virus, “people literally cannot necessarily afford to do that,” Shabo said. “We all pay the price.”
Republicans created loopholes in the new sick-leave bill that could hang employees out to dry

Nearly 200 countries around the world guarantee paid sick leave to workers, according to PRI. As Vox’s Dylan Scott notes, it’s often seen as an issue of simple justice: People shouldn’t lose their jobs or income just because they get sick. But the US isn’t among those 200 countries, and large swathes of American workers lack paid time off — for example, just 27 percent of those whose wages fall in the bottom 10 percent in the country have access to sick leave.

That’s always been a public health risk as well as an individual one, and now it’s even more so, since coronavirus spreads easily from person to person and experts say one of the best ways to contain it is for everyone — especially the sick — to keep their distance.

That’s why guaranteeing some form of paid sick leave has been a big priority for lawmakers in this time. The Families First Coronavirus Response Act does that, guaranteeing two weeks of paid sick leave to people who are sick or quarantined because of Covid-19, as well as caregivers for family members who are sick.

But there are big exceptions. Businesses with more than 500 employees are exempt — something the White House and congressional Republicans demanded before they would support the bill, according to the New York Times. This includes corporations like McDonald’s and Amazon, which employ millions (though many of those corporations have said they will voluntarily provide paid sick time during the crisis).

And now because of amendments introduced on Monday — also under pressure from Republicans — the bill now also exempts businesses with fewer than 50 employees and many health care providers, if the Labor Department determines that offering paid leave “would jeopardize the viability of the business as a going concern,” the Times reports.

About 59 million Americans work for businesses with more than 500 employees, according to the Times, and about 6.5 million of them have no paid sick days. Meanwhile, 12 million Americans working at small businesses have no paid sick leave. These workers could be forced to choose between following CDC recommendations and keeping their jobs. (That’s not counting the roughly 16 million workers who are self-employed, including gig economy workers.)

The bill was also supposed to address family leave, a crucial issue as parents nationwide are now without a source of child care as thousands of schools close. And the current version of the bill will provide 12 weeks of paid leave total to parents of children whose schools are closed, at 67 percent of the worker’s normal pay, up to $200 a day.

But small and large businesses are also exempted from this provision, leaving their employees potentially without benefits. Meanwhile, an earlier version of the bill allowed workers to take paid time off to care for a family member with symptoms or who had been exposed to the virus, but this portion was also removed during the amendment process.

The new version of the bill also allows employers to designate employees as necessary health care personnel and exempt them from paid benefits. And yet “there’s no accommodation for child care in this bill for those workers, and there’s also obviously a public health concern with having health providers and emergency responders potentially going to work after having been exposed to and exhibiting symptoms of the virus,” Shabo said.

Overall, the bill does move toward solving some of the problems laid bare by the coronavirus epidemic, and keeping workers and their families safe. But, Shabo said, the exemptions in the legislation show that “we’re still a nation of haves and have-nots when it comes to access to paid sick time and paid family and medical leave.”
Save As Many As You Can

Offline JRM

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Would house and apartment rental rates adjust downward with mass unemployment?  Or would mass unemployment eventually lead to mass homelessness among renters?
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That's a good question. Most rental homes are also somebody's investment, and most of them have a mortgage.

 No rent equates to no money for the landlord to pay his obligations. Since the short term approach has been for the government to reassure everyone there will be no evictions, it is the owners who might be affected first. If the banks foreclose and then own your rental, expect to get no quarter. I've had a bank for a landlord, it sucks.....and the government is not a good landlord either. Au contraire.

In general it is best if all parties can be cut a little slack.....and I hope that's the case. But renters and homeowners could end up being evicted.
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Offline JRM

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That's a good question. Most rental homes are also somebody's investment, and most of them have a mortgage.

 No rent equates to no money for the landlord to pay his obligations. Since the short term approach has been for the government to reassure everyone there will be no evictions, it is the owners who might be affected first. If the banks foreclose and then own your rental, expect to get no quarter. I've had a bank for a landlord, it sucks.....and the government is not a good landlord either. Au contraire.

In general it is best if all parties can be cut a little slack.....and I hope that's the case. But renters and homeowners could end up being evicted.

That all sounds very reasonable as an assessment of the basic situation.  It would seem that the government's near term guarantee that no one will be evicted or foreclosed upon can only last so long without major structural strains appearing -- likely very rapidly.

What is the data from previous deep recessions / depressions on this? What happened historically to rents when the shite has hit the fan in the total economy?

I don't have a handle on that data at all, but my "feel" for it is that somehow housing rents have not declined on an arc we associate with market economies with regard to other necessities. You know, the "supply and demand" premise.  If unemployment grows dramatically as in the case of a deep and lasting recession or depression, the market theory supposes that the supply of rental units would increase in relation to demand... Or does it? I mean, if folks can't pay the current rental rate, they'd presumably either downscale their "demand" in terms of quantity / quality and move elsewhere. Some would perhaps fit two families in a larger home, too, for example. So market theory supposes this would reduce rental rates in the total system. But has it historically? Would it likely do so? Or would the financial obligations of the owners result in lots of empty homes / apartments?
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Offline JRM

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PS -

As you are well aware, there have been "housing crises" in many cities in the USA prior to the present emerging economic crisis. Some of the causes of this may play a diminished role, such as the extreme increases in demand combining with limited supply in some cities -- especially those booming with tech industry.  But isn't tech industry likely to take a major hit over the next several weeks and months?

Some of this may be relevant, somehow.:

https://www.democracynow.org/2020/3/19/us_economy_coronavirus_stimulus_joseph_stiglitz
« Last Edit: March 19, 2020, 12:30:20 PM by JRM »
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline Nearingsfault

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In my area a market that forced cottagers to sell would definitely help ease rents. Lots of the housing stock has been locked up here over the last decade as investments as short term vacation rentals. Each one has removed full time rental stock from the market. Air bnb is more profitable and with less problems collecting so that is the route they have gone.
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Offline JRM

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In my area a market that forced cottagers to sell would definitely help ease rents. Lots of the housing stock has been locked up here over the last decade as investments as short term vacation rentals. Each one has removed full time rental stock from the market. Air bnb is more profitable and with less problems collecting so that is the route they have gone.

Excellent points. And what you have in your locale is similar to the situation in lots of other locations. It is certainly the case in my little city of Santa Fe.

While I lean in an anarchistic direction in my political philosophy, this is mostly because "the rule of law" has never worked out well for the planet or the "little people" (lower classes) -- and in fact ensures that there will be a lower class to serve the upper classes.  So it is with some irony, perhaps, that I would advocate for laws limiting how many houses or apartments anyone can own. I would restrict that number severely. Especially in an economy in which the 1% owns -- what? -- half of the nation's total 'wealth'? Or more?
« Last Edit: March 19, 2020, 12:55:32 PM by JRM »
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Online Eddie

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It depends a lot on the demographics of a particular market.

In this area, rents did not go down at ALL in the 2008 crisis. In some areas they did....but that whole thing usually works out in a certain predictable way.

Dropping rents tend to be a lower rent for the NEXT tenant, after the fact, when the place doesn't rent in a reasonable length of time, after the CURRENT tenant moves on or gets thrown out. Rents seldom get lowered for an existing tenant.

As a landlord, I'm very worried about the ability of my tenants to meet their obligations. It isn't a winning proposition for me to throw people out.....far from it. That is almost always a last resort situation anyway. It adds cost to property management to evict tenants.....and properties sitting idle.....flow no cash...and cash flow is what matters to me as an investor.

What makes the desert beautiful is that somewhere it hides a well.

Offline JRM

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data -

for the world

https://www.cnbc.com/2017/11/14/richest-1-percent-now-own-half-the-worlds-wealth.html

USA

1% owns 40%

https://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States

Close enough....
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What is the data from previous deep recessions / depressions on this? What happened historically to rents when the shite has hit the fan in the total economy?

Eddie will give you far better information about the economics of owners and renters. But I am --just barely-- old enough to remember when it was three generations to a house. I started life in such a house and can still remember my bedroom as a one-two year old in my grandparent's house. In my parent's generation starting out married life in a parent's home was a norm for working class people. It may well become so again.

My daughter is a wine broker selling to restaurants, and her boyfriend runs the bar for Richmond's best restaurant. I can see the future from here.
"...reprehensible lying communist..."

Offline JRM

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It depends a lot on the demographics of a particular market.

In this area, rents did not go down at ALL in the 2008 crisis. In some areas they did....but that whole thing usually works out in a certain predictable way.

Dropping rents tend to be a lower rent for the NEXT tenant, after the fact, when the place doesn't rent in a reasonable length of time, after the CURRENT tenant moves on or gets thrown out. Rents seldom get lowered for an existing tenant.

As a landlord, I'm very worried about the ability of my tenants to meet their obligations. It isn't a winning proposition for me to throw people out.....far from it. That is almost always a last resort situation anyway. It adds cost to property management to evict tenants.....and properties sitting idle.....flow no cash...and cash flow is what matters to me as an investor.

So the obligations are a series of nodes on a network of connected, interdependent nodes. And all goes relatively smoothly until one of the nodes ceases to perform its nodal function.  "Morality" can either be in play or not, depending on whether the rental units in question are tied to obligations to other nodes on the network, or to what extent.

My landlord has to pay property taxes on the place my partner and I live in, and on my esteemed next door neighbors. But I'm sure he has no mortgage to pay. He inherited these homes.  He has few financial obligations of an investment sort here, aside from minimal maintenance costs (and I do mean minimal, since my front door doesn't work properly! and I've not yet gotten around to fixing it myself -- long story). And the roof isn't leaking at the moment.  He has retirement income and is a home owner, so he could do fine by charging my neighbors and my own family (of a sort) half as much rent as he does. Or less. And it may come to that at some point.

How does one ask one's landlord to please lower the rent? Hmmm.
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline JRM

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I can see the future from here.

I apologize for my giggling. It's perhaps not very funny. But perhaps there is a silver lining in this, a chance for the biosphere to recover a little, maybe?

I already connected way more with my neighbors than I ever have before, of pure necessity on one level. But also because this current crisis opens up opportunities for radical greenies like me to advance our re-localization fantasies in the real world.

My next door neighbors and I are simultaneously breathing a sigh of relief and halfway scared shitless.
« Last Edit: March 19, 2020, 01:13:55 PM by JRM »
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Online Eddie

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It depends a lot on the demographics of a particular market.

In this area, rents did not go down at ALL in the 2008 crisis. In some areas they did....but that whole thing usually works out in a certain predictable way.

Dropping rents tend to be a lower rent for the NEXT tenant, after the fact, when the place doesn't rent in a reasonable length of time, after the CURRENT tenant moves on or gets thrown out. Rents seldom get lowered for an existing tenant.

As a landlord, I'm very worried about the ability of my tenants to meet their obligations. It isn't a winning proposition for me to throw people out.....far from it. That is almost always a last resort situation anyway. It adds cost to property management to evict tenants.....and properties sitting idle.....flow no cash...and cash flow is what matters to me as an investor.

So the obligations are a series of nodes on a network of connected, interdependent nodes. And all goes relatively smoothly until one of the nodes ceases to perform its nodal function.  "Morality" can either be in play or not, depending on whether the rental units in question are tied to obligations to other nodes on the network, or to what extent.

My landlord has to pay property taxes on the place my partner and I live in, and on my esteemed next door neighbors. But I'm sure he has no mortgage to pay. He inherited these homes.  He has few financial obligations of an investment sort here, aside from minimal maintenance costs (and I do mean minimal, since my front door doesn't work properly! and I've not yet gotten around to fixing it myself -- long story). And the roof isn't leaking at the moment.  He has retirement income and is a home owner, so he could do fine by charging my neighbors and my own family (of a sort) half as much rent as he does. Or less. And it may come to that at some point.

How does one ask one's landlord to please lower the rent? Hmmm.

You communicate openly and let him know in advance that you might have trouble meeting your obligations....and let him know you'd appreciate a little lenience.

You're lucky to even know your landlord. Most landlords have a property management firm between them and their tenants.....and for good reason. My guess is that your landlord depends on your rents to supplement his social security, which is probably not a lot of money. He probably wants to keep you and his other tenants.....but he probably has limits to his ability to cut your slack..

You need to let him know  what you CAN pay...and then,,,if he does give you some lenience, do your best not to take undue advantage. If you guys have been long term good tenants, your chances are pretty good he'll work with you....to the degree that he can.


What makes the desert beautiful is that somewhere it hides a well.

 

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