Record Unemployment Numbers This Week

This morning ADP Private Sector Report was sobering to see 20.2 million people lost their jobs in April. By far the largest number since the survey began in 2002, the previous record was 835,000 in 2008. The loss represents all of the jobs created since the financial crisis. As America starts to open, there is hope that April was the bottom and we are climbing out of it. However, the daily human tragedy cannot be ignored or minimized. My heart goes out to all the families that have been affected by this virus. If the economy can be restarted safely, many analysts (including the Fed), believe that the job market can rebound over the next few quarters. However, the days of 3.0% unemployment may be at least a year away. This Friday’s unemployment figures will be closely watched. After all the major volatility in March The 10-year T is now trading in a tight range, in the .60-.75% range and is at 0.70% today. As oil rebounded from negative prices into positive territory, the Treasury yields have increased accordingly as threats of deflation have subsided for now. The CMBS market is thawing as spreads throughout the capital stack are narrowing. New originations at 60-65% LTV with all in rates in the 4% range and many loans will require a 6-month interest reserve. Expect originators to as “CMBS 3.0” begins, expect originators to be about strong collateral and strong sponsors but no hotels currently. We are seeing some bridge lenders start to quote again on well underwritten multifamily transactions. Rates are lower than “hard money” rates, but leverage has been dialed back. The 80+% of cost loans pre-COVID are now 60-65% LTC, but it’s a start. The reinstituting of bank lines to lenders and/or a restart of the CLO market will greatly help. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners