In June, retail sales increased by 7.5%. Retail sales account for about a quarter of all consumer spending. The reopening of malls, restaurants, and other service industry positions allowed millions of people to return to work, buoying consumption. Retail sales, $524 billion, approached pre-pandemic levels. Non-store retailers continue to rack up significant gains. Their sales surged 23.5% from a year earlier.
The retail sales number was greeted with skepticism because the data was collected before coronavirus cases began to spike up again. Coronavirus case counts are rising in 38 states, including Florida.
The U.S. economy is stumbling as the viral outbreak intensifies, threatening to slow hiring and intensifying the uncertainty for employees, consumers and companies across the country. Reopening efforts are on pause in 15 states.
The Labor Department reported that unemployment claims remained almost unchanged, at 1.3 million for the week that ended July 11. A flat number signifies that restrictions on businesses have stalled our economic recovery.
Lydia Boussour, an economist at Oxford Economics, described the jobs report as effectively an illusion. She said, “While today’s report gives the illusion of a fearless consumer spending lavishly, the reality is more sobering. Consumers are increasingly fearful amid new spikes in COVID-19 cases.” In regard to jobs, she said “the jobs recovery has entered a slower phase, with renewed virus fears constraining income growth, depressing consumer confidence and hurting demand in future months.”
Mark Cohen, director of retail studies at Columbia University’s Graduate School of business, said the ebb and flow of the pandemic places enormous burdens on retailers. He believes that the recovery in retail sales was not sustainable. Cohen predicted that J.C. Penney and even Macy’s might not survive.
Anecdotal evidence highlights that our economy has slowed. Open Table, the restaurant-reservation website, provided data that on a national basis the number of seated diners recently stalled, after showing rising numbers in May and June. JP Morgan Chase, according to its analysis of credit card spending, reported that consumer spending began to slow down at the end of June. Jesse Edgerton, an economist at the bank, said, “I suspected the modest pullback we have seen in our card spending data since late June is driven by concern about the resurgence of COVID-19.”
The retail report showed that shoppers and businesses are adjusting to life in a pandemic. Bars in Texas and Florida shuttered again at the end of June. The governor of Pennsylvania ordered that restaurants could only seat 25% of their potential customers. Gap, Kohl’s and other stores are withdrawing clothes worn in their changing rooms for several days as a precautionary move.
Government stimulus programs, such as enhanced unemployment insurance for laid-off workers have prevented a total disruption of consumption. In brief, Americans needed financial relief to buy food and pay their rent.
How will the government respond to the renewed coronavirus outbreaks?
Robert Frick, an economist at Naval Federal Credit Union, said “the potential silver lining in a stalled decline in jobless claims is a better chance that Congress at least partially extends the extra $600 a week unemployed workers have been getting under sweetened unemployment insurance expiring July 31.”
For our economy to enjoy sustained growth, we need a coronavirus vaccine, because it will enable our immune system to fight the virus.The possibility that biotechnology company Moderna has developed a COVID-19 vaccine provides a glimmer of hope. It found that 45 volunteers who received their vaccine experienced an immune response. Later this month Moderna will begin a large Phase 3 trial encompassing 30,000 volunteers. Let us hope the vaccine is safe and effective.
