Reopening of State Economies Boosts Sales, Job Losses Remain High – June 22, 2020

We see it every day. Hair salons, medical offices, retail stores, restaurants, and more are slowly reopening. We’re far from reclaiming the economic highs of pre-Covid America, but activity is rising, and it is evident in consumer spending.

Led by a 44% jump in auto sales, May retail sales surged a record 17.7%, easily beating the consensus forecast of 7.7% (Econoday). In April, retail sales fell a record 14.8% versus March.

Categories hit hardest during the shutdown–clothing, furniture, appliances, and sporting goods–led the way.

Stores that are reopening, coupled with stimulus money and pent-up demand, played a big role. Meanwhile, an uptick in consumer confidence, as measured by the University of Michigan and the Conference Board (2 closely watched surveys), are adding a tailwind to spending.

Can it be maintained? We may get another stimulus bill from Congress, but continued gains in employment and a significant decline in layoffs are necessary longer-term prerequisites.

Reappearing jobs and disappearing jobs

May’s surge in employment was a welcome surprise; yet, layoffs are still at a high level. We’re headed in the right direction but remain almost triple the Great Recession peak of 665,000 (as of March 28, 2009–St. Louis Federal Reserve).

Picture it like a giant revolving door. Plenty of workers are being rehired, and plenty of workers are still being laid off amid an enormous amount of uncertainty.

In his prepared remarks before a House and Senate committee last week, Fed Chief Jerome Powell said, “Some indicators have pointed to a stabilization, and in some areas a modest rebound in economic activity.”

Still, he added, “Much of that economic uncertainty comes from uncertainty about the path of the disease… Until the public is confident that the disease is contained, a full recovery is unlikely.”

He’s probably right. Some are ready to go back in public. Others are not.

We’re still seeing outsized layoffs, Covid is spiking in some states, and we’re not sure where we will be in the fall. There simply isn’t a modern-day playbook for reopening an economy that’s been shut down by a pandemic.

For now, May’s much-better-than expected rise in retail sales is a good start.

If you have any questions or concerns, feel free to reach out to me. My door is open.

Created 2020-06-22 14:54:22