U.S. Unemployment Claims Expected to Stay Above 1 Million

Fannie Mae and Freddie Mac are instituting a new 0.5% fee to most consumers looking to refinance their mortgages. Credit…J. David Ake/Associated PressThe cost of refinancing a mortgage is about to go up and it has nothing to do with the Federal Reserve.Even as the county’s monetary regulators are keeping interest rates at record lows, two…

U.S. Unemployment Claims Expected to Stay Above 1 Million

Fannie Mae and Freddie Mac are instituting a new 0.5% fee to most consumers looking to refinance their mortgages. Credit…J. David Ake/Associated PressThe cost of refinancing a mortgage is about to go up and it has nothing to do with the Federal Reserve.Even as the county’s monetary regulators are keeping interest rates at record lows, two of the nation’s biggest mortgage finance firms said that they would start charging an additional fee on most home loan refinancings. The 0.5 percent fee, announced on Wednesday by Fannie Mae and Freddie Mac, will mean that the average homeowner will spend an additional $1,400 to refinance a mortgage.Fannie, Freddie and their regulator, the Federal Housing Finance Agency, are justifying the new fee as a prudent measure to deal with anticipated losses from the pandemic. Also, because the added costs for a borrower can be spread out over the life of a mortgage, it would add only a few dollars a month to the average homeowner’s bill.Consumer advocates and banking officials denounced the move as an unfair tax on homeowners who are trying to reduce their mortgage bills to free up money for new spending, which the ailing economy could use.“It is an indefensible tax on consumers,” said Robert Broeksmit, chief executive of the Mortgage Bankers Association, an industry trade group. “One arm of the government is saying it wants credit to be cheap and another arm is saying it will grab it.”Fannie and Freddie requested and were granted “permission to place an adverse market fee on mortgage refinance acquisitions beginning September 1, 2020 until otherwise directed,” the F.H.F.A. said that in a statement.Fannie and Freddie, which are sponsored by the government, do not write mortgages. Instead, they buy mortgages from banks and repackage them into mortgage-backed securities that are guaranteed against default. The guarantee allows banks to maintain relatively low rates on such mortgages, the typical size of which is $280,000.Since the pandemic started, millions of homeowners with mortgages backed by Fannie or Freddie have sought to defer their payments by a year. In April, some in the mortgage industry had predicted that as many as 20 percent of all such borrowers could seek such deferrals, but the number has been lower than expected — one possible reason for the higher refinancing fee. The M.B.A. said that 5.2 percent of mortgages backed by Fannie and Freddie were in forbearance, down from just over 6 percent in recent weeks.Also in April, the F.H.F.A. had moved to provide long-term relief for the mortgage industry, concerned that a wave of loan payment deferrals would strain financial firms that service loans for investors in mortgage-backed securities. The housing regulator said at the time that mortgage firms had to make just four months of cash payouts to bond investors on mortgages that homeowners have stopped paying. After that period, Fannie and Freddie would assume those obligations, for up to eight more months if necessary.The new charge on mortgage refinance fees roughly coincides with the start of that commitment by Fannie and Freddie.Larry Kudlow, the White House chief economic adviser, said “the economy is doing well,” but that it is “not out of the woods yet.”Credit…Andrew Harnik/Associated PressTwo top White House economic advisers provided starkly different views about the U.S. economy on Thursday, with the acting head of the Council of Economic Advisers warning the recovery will be bumpy and gradual without more fiscal help and President Trump’s top economic adviser saying a strong rebound is already underway.The comments came as the White House’s Council of Economic Advisers released a report on the impact of the $2.2 trillion relief legislation that Congress passed in March and as lawmakers are struggling to agree on an additional package of measures.“I think that very substantial headwinds remain,” said Tyler Goodspeed, the acting chairman of the Council of Economic Advisers. “What is going to be absolutely essential for a continued economic recovery is a continued recovery in the U.S. labor market.”In terms of regaining the tens of millions of jobs that have been lost this year, Mr. Goodspeed said, “It remains the case that we have a ways to go.”Larry Kudlow, director of the National Economic Council, said “the economy is doing well,” and that “in general, the jobs story is very good — we’ve had three blockbuster months.” Mr. Kudlow was speaking at the 2020 Washington Conference on the Americas.Mr. Kudlow acknowledged that the economy was “not out of the woods yet” but he presented a far more sanguine view of the country’s ability to bounce back from the virus-induced recession — even absent more federal help.“There is clearly a recovery going on, and with demand rising and inventories bare, I think it’s a self-sustaining recovery,” he said. “We’ve come a long way on the virus, in the past four to five months.”But much of that progress stems from the $2.2 trillion in federal aid that lawmakers approved in March to help support workers and businesses affected by the pandemic. Much of that help has been exhausted, including an additional $600 per week in unemployment benefits that was lifting consumer spending.People wait to file unemployment insurance claims in Tulsa, Okla. New claims continue to surpass levels never seen before this year.Credit…Joseph Rushmore for The New York TimesThe number of Americans filing for state unemployment benefits fell below one million last week for the first time since March. But layoffs remain exceptionally high by historical standards, even as the pace of rehiring has slowed.The Labor Department reported on Thursday that 963,000 people last week filed first-time claims for benefits under regular state unemployment programs. Another 489,000 applied under the federal Pandemic Unemployment Assistance program, which covers independent contractors, self-employed workers and others who don’t qualify for regular state unemployment insurance.

Initial weekly unemployment claims,
both regular and those under the Pandemic Unemployment Assistance program

6 million
Regular claims fell under one million last week for the first time since mid-March
5
4
3
2
1

Feb.
March
April
May
June
July
Aug.

Initial weekly unemployment claims, both regular and those under the Pandemic Unemployment Assistance program
6 million
5

Regular claims fell under
one million last week for the
first time since mid-March

4
3
2
1

Feb.
March
April
May
June
July
Aug.

The number for state claims is seasonally adjusted; the figure for the federal program is not.Unemployment filings have fallen sharply since late March, when nearly 6.9 million Americans applied for benefits in a single week. But filings still dwarf those in any previous recession: Before the coronavirus pandemic, the worst week on record was in 1982, when 695,000 people submitted claims.“Even though we’re exiting the worst of the current crisis, we’re still above the worst of the Great Recession,” said Daniel Zhao, senior economist for the care
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