CUNA’s latest Economic Update video features Senior Economist Jordan van Rijn examining the latest on the economy, what to expect from the recovery, how long the recovery might take, updated credit union operations forecast and more. The video and presentation are available here.
“The COVID-19 pandemic is unprecedented. It caused an increase in unemployment rate to 14.7%, the highest in decades, and after some adjustment, the BLS actually found the unemployment went up to 20%, the highest since the Great Depression,” van Rijn said. “The good news is that this unemployment rate has fallen considerably since then.”
van Rijn did note that around 250,000 of the new jobs are temporary census workers hired for this year, and that many of the remaining unemployed will likely remain permanent.
CUNA economists estimated unemployment would be at 7.5% end of this year and 6.5% end of 2021
“A lot of people thought we’d more of a V-shaped recovery, go into temporary lock down, get the pandemic under control and then basically open everything up again ang maybe a year later get the jobs back,” van Rijn said. “Now I think we’re looking at a sort of ‘Nike swoosh’ shaped recovery, with a big downturn and then a steady increase over the next couple pf years.
“The bad news is we’re going to be in this for a while with elevated unemployment rates, business closures and people out of work,” he added. “The good news is that if this holds true, it would be faster than the recovery from the Great Recession.”
Credit unions have seen low mortgage delinquencies thus far in 2020, partly due to the fact they’re working with members on payment relief, but van Rijn notes that as these programs begin to expire and months go on, the delinquencies could rise.
Prior to 2020, credit cards were growing at 6-7% per year, but the first 6 months of this year fell 8%, van Rijn said. Other unsecured loans are up 12% for first 6 months of this year, likely due to credit unions working to provide different loans during the pandemic like emergency loans; Paycheck Protection Program loans also fall into this category.
“New auto loans were on a downward trend before, they’re down 4% this year, while used auto loans up 2.3%, which would be 4.6% annualized growth, stronger than last year,” he said. “First mortgages have grown around 5.9% over the first six months, annualized that would be 12%, the strongest growth in six or seven years.”
First mortgages account for 70% of loan growth this year, which CUNA estimates will be about 6%.