Axios Markets

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October 26, 2022

👋 Oh hey. We're jam-packed today with news on work, houses, cars and all the vibes.

🚨The 30-year mortgage rate just crossed the 7% line, and is at its highest since 2001, per the Mortgage Bankers Association.

Today's newsletter is 1,135 words, a 4-minute read.

1 big thing: Behind the surge in disabled workers

Data: NYFed analysis of the Current Population Survey; Chart: Axios Visuals
Data: NYFed analysis of the Current Population Survey; Chart: Axios Visuals

There's been a surge of about 900,000 disabled people in the U.S. workforce since 2020, likely because of Americans with long COVID, according to new research published by the Federal Reserve Bank of New York, Emily writes.

Why it matters: It's an encouraging sign, in one sense. Disabled Americans face enormous obstacles in the job market; if folks with long COVID can keep working, that means some employers are accommodating their needs.

  • But as the economy cools, employers could become less willing on that front — and it's an open question as to whether these folks stay employed.
  • "I hope that isn't true, but it's something I would certainly keep an eye on," says Katie Bach, a nonresident senior fellow at Brookings who has been studying long COVID's impact on the workforce, and recently found the condition is keeping as many as 4 million people out of work.

State of play: The pandemic led to an increase in the number of Americans who say they're disabled. (See the chart below.)

The intrigue: Economists are still nailing down why so many more disabled people, who traditionally have low labor force participation, are working now.

  • Economist Richard Deitz, author of the NY Fed's new paper, is among the first to pinpoint long COVID as a possible factor; others attribute the surge to the tight labor market and the rise of remote work — which can make it easier for disabled workers to remain employed or get a job.
  • There's likely an interplay between the two. Some disabled people can now more easily work remotely and may have entered the job market; and the ability to work from home is also helping many of those with long COVID — a cohort that didn't exist before 2020 — keep their jobs.

What they're saying: "I would bet that the majority of the [increase in disabled workers] is people with long COVID who are still working," Bach says.

Zoom out: Long COVID is similar to another condition called myalgic encephalomyelitis/chronic fatigue syndrome, which Deitz himself suffers from, he writes. Telework and flexible scheduling have been key when it comes to keeping those with the condition in the workforce.

  • "Such accommodations can help workers with long COVID control their environment, avoid physical exertion around commuting, and take rest breaks as needed, helping them to manage their symptoms and remain productive," he writes.

Yes, but: Not all work can be done remotely or on a flex schedule.

  • Bach says that often folks who are diagnosed with ME/CFS initially stay in their jobs, but ultimately wind up dropping out of the workforce. "That is a story we hear a lot. It's like, 'Yeah, I kept working for a couple years and then I just couldn't anymore.' "

What to watch: Disability counts have fallen in recent months. That could mean long COVID sufferers have recovered and no longer consider themselves disabled, Deitz writes.

Bonus chart: More disabled Americans

Data: NYFed analysis of the Current Population Survey; Chart: Axios Visuals
Data: NYFed analysis of the Current Population Survey; Chart: Axios Visuals

2. Catch up quick

⚠️ Weak earnings from Alphabet and Microsoft fan fears about the economy. (Reuters)

🚗 Intel prices IPO for self-driving car unit Mobileye, raising $861 million. (WSJ)

🔌 Rivers, the world’s largest source of clean energy, are evaporating amid heat waves and droughts. (Bloomberg)

3. The house-price decline accelerates

Data: S&P Case Shiller; Chart: Axios Visuals
Data: S&P Case Shiller; Chart: Axios Visuals

American home prices fell by 2.4% in just the two months from June to August, Axios' Felix Salmon writes.

  • On the other hand, they're still up 4.8% in the past six months, 13.1% over the past year, and 42.2% since the pandemic hit.

Why it matters: Prices could fall a lot further yet.

Be smart: The irony of the current housing market is that even as the price of housing is starting to decline, the cost of housing is still hitting new highs.

  • By the numbers: Someone buying a median-priced home in September rather than June would pay 5.1% less for their house ($427,000 rather than $450,000) but — assuming a 20% downpayment and a 30-year mortgage — would face monthly mortgage payments almost 10% higher, at $2,260 per month.
  • Mortgage rates have continued to rise in October, most recently hitting a new high of 7.16%, per the Mortgage Bankers Association. That means housing will continue to become less affordable, even if there are further declines in prices.
  • As interest rates rise, all-cash buyers similarly face a higher opportunity cost of sinking their money into a property. That $427,000, sitting in a money-market fund paying 3% interest generates almost $13,000 per year — income that buyers are effectively giving up by buying.

Between the lines: San Francisco and Seattle led the decliners, in a sign that weakness in tech stocks is being felt in certain housing markets.

The big picture: Further declines in house prices can't come soon enough, as far as the Fed is concerned. Housing is one third of the Consumer Price Index.

The bottom line: A period of modestly declining house prices feels broadly desirable right now, even in this nation of homeowners.

4. GM supply chain snaps back

Data: FactSet; Chart: Axios Visuals

General Motors sales surged in the third quarter, as production showed signs of shaking off the supply chain issues that bedeviled the auto industry's recovery from the pandemic, Matt writes.

Why it matters: Production was juiced by GM's ability to finally finish production of trucks and SUVs that had been held up during the second quarter by lack of components such as semiconductors.

Driving the news: The largest American automaker — by U.S. sales — delivered solid results, including a 56% percent rise in sales and a better-than-expected profit of roughly $3.3 billion.

Yes, but: GM has signaled that it still intends to keep its levels of inventory tight, part of an industry-wide push to focus on high prices and profitability rather than production goals.

What they're saying: "We will be as disciplined as possible," said Mary Barra, General Motors' chief executive, to analysts on a conference call after the company's results were released.

  • "And the reason I say 'as disciplined as possible,' we also do have to be responsive to what the competitive environment is. But I think ... as an industry, we've learned a lot over this last couple years."

5. Stock drops bum out the rich

Data: Morning Consult/Axios Inequality Index; Chart: Axios Visuals
Data: Morning Consult/Axios Inequality Index; Chart: Axios Visuals

Consumer sentiment plunged last month, as markets went into freefall, Axios' Kate Marino writes.

  • In the highest income group, where folks are more likely to have greater financial assets, sentiment fell the most.

By the numbers: The higher income group’s sentiment dropped nearly six points last month — while the middle and lower income groups dropped 3.4 points and less than half a point, respectively, according to polling from the Morning Consult/Axios Inequality Index.

The pattern: Sentiment in the higher income group also went up more during the July-to-August rally — and fell more during the sell-off over the first half of the year.

The big question: Do markets drive consumer sentiment — or does consumer sentiment drive markets?

  • 💭 Our thought bubble: It’s probably a little of both.

1 thing Emily's thinking about: Cutting back on saying "sorry." Like a lot of people, particularly women, I overuse the word, apologizing when I didn't actually mess up.

From Rachel Feintzeig in the Wall Street Journal (paywall):

"The apology is running amok in conversations and communications. We drop it indiscriminately, crying mea culpa for all manner of things we really shouldn’t be sorry for—and diluting the apologies that truly matter. Is it time to stop?"

Is it time to stop?? I'm not sorry for asking. Email me and let me know.

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Today's newsletter was edited by Kate Marino and copy edited by Phoebe Neidl.