New CUNA Economic Update · 2020. 9. 17. · © Credit Union National Association 2020. All rights...

CUNA Economic Update

September 2020

Jordan van Rijn, PhDSenior Economist (CUNA)

Economic Overview

U.S. Unemployment (%)Percent // Source: Bureau of Labor Statistics (BLS) via St. Louis Federal Reserve

3.6 3.54.4

14.713.3

11.110.2

8.47.5

12.111.2

January-20 February-20 March-20 April-20 May-20 June-20 July-20 August-20 2020

Forecast

US Unemployment US Unemployment Adjusted

Great Recession Unemployment Peak: 10.0%

Job Recovery by SectorSource: Bureau of Labor Statistics / NY Times

0 12 24 36 48 60 72

Number of Months

4/60 - 2/61

12/69 - 11/70

11/73 - 3/75

1/80 - 7/80

7/81 - 11/82

7/90 - 3/91

Job Market Declines & RecoveriesSource: Bureau of Labor Statistics

0 12 24 36 48 60 72

Number of Months

4/60 - 2/61

12/69 - 11/70

11/73 - 3/75

1/80 - 7/80

7/81 - 11/82

7/90 - 3/91

3/01 - 11/01

0 12 24 36 48 60 72

Number of Months

4/60 - 2/61

12/69 - 11/70

11/73 - 3/75

1/80 - 7/80

7/81 - 11/82

7/90 - 3/91

3/01 - 11/01

12/07 - 6/09

0 12 24 36 48 60 72

Number of Months

4/60 - 2/61

12/69 - 11/70

11/73 - 3/75

1/80 - 7/80

7/81 - 11/82

7/90 - 3/91

3/01 - 11/01

12/07 - 6/09

2/20 - Present

0 12 24 36 48 60 72

Number of Months

4/60 - 2/61

12/69 - 11/70

11/73 - 3/75

1/80 - 7/80

7/81 - 11/82

7/90 - 3/91

3/01 - 11/01

12/07 - 6/09

2/20 - Present

Optimistic (1 year)

0 12 24 36 48 60 72

Number of Months

4/60 - 2/61

12/69 - 11/70

11/73 - 3/75

1/80 - 7/80

7/81 - 11/82

7/90 - 3/91

3/01 - 11/01

12/07 - 6/09

2/20 - Present

Optimistic (1 year)

Baseline (2 years)

0 12 24 36 48 60 72

Number of Months

4/60 - 2/61

12/69 - 11/70

11/73 - 3/75

1/80 - 7/80

7/81 - 11/82

7/90 - 3/91

3/01 - 11/01

12/07 - 6/09

2/20 - Present

Optimistic (1 year)

Baseline (2 years)

Pessimistic (3+ years)

0 12 24 36 48 60 72

Number of Months

4/60 - 2/61

12/69 - 11/70

11/73 - 3/75

1/80 - 7/80

7/81 - 11/82

7/90 - 3/91

3/01 - 11/01

12/07 - 6/09

2/20 - Present

Optimistic (1 year)

Baseline (2 years)

Pessimistic (3+ years)

WSJ Economic Forecasting Survey September 2020

Unemployment by Composition: Permanent vs. Temporary Job LossesApril – August 2020 // Source: BLS

9.7%12.5%

20.2% 22.3%

87.6%83.9%

74.0%71.4%

100.0%

Apr-20 May-20 Jun-20 Jul-20 Aug-20

Permanent Temporary

Job Postings on Indeed7 day moving average through September 4, indexed to February 1 // Source: Indeed

Index of Consumer Sentiment1952 – 2020 // Source: University of Michigan

How has business been affected by the Covid-19 pandemic?Source: Small Business Pulse Survey // August 16 – August 22

4.6%1.5%

Large negative effect Moderate negative effect Little or no effect Moderate positive effect Large positive effect

Share of Permanently Closed BusinessesSource: Yelp // March 10 – July 10

Announced U.S. Bankruptcies by YearSource: S&P Global Market Intelligence // Year-to-date as of August 9, 2020

Zillow Single-Family Home IndexSmoothed, seasonally adjusted measure of typical home value across U.S. // 1996 – 2020 // Source: Zillow

$160,823

$251,995

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000Ja

Mortgage Delinquency RatesSources: FDIC, NCUA // January 2005 – June 2020

Credit Unions (60+ days) Banks (90+ days)

Percent of Renters Behind on Last Month’s RentSource: Center on Budget and Policy Priorities // As of week ending July 21

More than 250 Vaccine Candidates in DevelopmentSource: McKinsey & Company // July 29, 2020

McKinsey Report Conclusion

“All the evidence suggests that COVID-19 vaccines are likely to become available for focused

populations somewhere between the fourth quarter of 2020 and the first quarter of 2021.”

Potential Barriers to Implementation

1. Manufacturing:• Plans for 1 billion doses by end of 2020 & 8 - 9 billion by end of 2021.

2. Effectiveness:• Early vaccines historically not as effective.

3. Targeting:• How will targeting be determined?

4. Adoption:• 35% - 50% of Americans would not get vaccine (Source: Gallup,

Science Magazine).

NABE Policy SurveyAugust 2020

University of Chicago Booth IGM Experts PanelAugust 7 - 10, 2020

Credit Union Operations

Federal funds & 30-year fixed mortgage ratesSource: Freddie Mac, Federal Reserve via St. Louis FRED // 1998 - 2022

9.00Ja

Fed Funds 30-Year Fixed Mortgage

9.1 9.2

6.7 7.1

Credit Cards Other Unsecured New Auto Used Auto 1st Mtg. HEL/2nd Mtg. Commercial

2014 2015 2016 2017 2018 2019 2020 (June)

Loan growth by product12-month growth within seven key loan portfolios // Source: NCUA and CUNA

Credit union loan growth Source: NCUA, CUNA // 1992 - 2021

6.5%6.0% 6.0%

Credit union savingsSource: NCUA, CUNA // 1992 - 2021

Credit union portfolio qualitySource: NCUA, CUNA // % of Loans Outstanding // 1997 - 2022

1.001.10

0.560.64

Recession Delinquencies Chargeoffs

75 76 77

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2Q20 2020 2021

Credit union ROA Net income as a % of avg. assets // Source: NCUA & CUNA

Median ROA by asset sizeSource: NCUA, CUNA

-0.09%

-0.20%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Recession < $50m $50m - $250m $250m - $500m > $500m

Actual results Quarterly results/forecasts Annual forecasts

5 Yr Avg 2019 2020:1 2020:2 2020:3 2020:4 2020 2021

Growth rates:

Savings growth 6.8% 8.1% 4.3% 8.3% 2.0% 4.0% 18.6% 8.0%

Loan growth 9.3% 6.5% 0.9% 2.1% 2.0% 1.5% 6.0% 6.0%

Asset growth 6.9% 7.7% 4.6% 6.8% 1.5% 3.0% 16.0% 7.0%

Membership growth 3.9% 3.6% 0.8% 0.8% 0.7% 0.5% 2.7% 3.0%

Liquidity:

Loan-to-share ratio** 82.1% 84.4% 81.1% 77.0% 77.0% 75.2% 75.2% 73.8%

Asset quality:

Delinquency rate** 0.77% 0.70% 0.63% 0.57% 0.75% 1.00% 1.00% 1.10%

Net charge-off rate* 0.55% 0.56% 0.57% 0.48% 0.65% 0.80% 0.64% 0.80%

Earnings:

Return on average assets (ROA)* 0.83% 0.93% 0.53% 0.61% 0.45% 0.35% 0.50% 0.35%

Capital adequacy:

Net worth ratio** 11.1% 11.4% 11.0% 10.5% 10.5% 10.2% 10.2% 9.8%

Credit union forecastSeptember 9, 2020

*Quarterly data, annualized. **End of period ratio.

Thank You

New CUNA Economic Update · 2020. 9. 17. · © Credit Union National Association 2020. All rights...

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