There are two important reports on the U.S. economy worth mentioning this morning. First, retail and food services sales totaled $524.3 billion in June, according to the U.S. Census Bureau. That was a 7.5 percent jump from the previous month, better than analysts expected, and the May gain was revised higher. Ten of the thirteen major retail categories improved in June, helped by strong sales at furniture, electronics and appliances, and clothing and sporting goods stores. Sales at nonstore retailers (Amazon), on the other hand, fell by the most since 2018, but this actually an encouraging side effect of the economy reopening. More importantly, with broader retail sales now just 0.6 percent below pre-pandemic levels, consumer spending is clearly the latest example of the various V-shaped (see below) rebounds going on in America. Subsequent retail sales reports, though, may start to reflect a slight loss in momentum for the recovery due in part to the disruptions caused by the “second wave” of COVID-19. Indeed, virus-related headlines have been generally discouraging over the past month so at the very least the added uncertainty this creates should cause some consumers to curtail their away-from-home discretionary spending for the time being.
Retailers and other brick-and-mortars dependent on customer foot traffic could understandably respond to such an environment by pausing any rehiring initiatives that began when the broader lockdowns were lifted, and many firms may not even have a choice due to the business restrictions several “hot spot” states have reinstated over the past few weeks. Evidence of this can be seen in the latest unemployment insurance data. Specifically, the number of Americans making first-time claims for unemployment benefits rose by a larger-than-expected 1.3 million last week. That was down from the previous week and the 15th such decrease in a row, but the pace of the decline has clearly slowed over the past month, and the gains have been particularly severe in the states with a more pronounced uptick in new COVID-19 cases (see below). Further, non-seasonally adjusted claims figures have already started to rise, and continuing claims (Americans collecting UI for longer than a week) remain above 17 million (nearly double this if you also include Pandemic Unemployment Assistance). None of this means that the economic recovery in the United States has been derailed, especially with roughly 138 million Americans still working, the most important demographic profile (prime-age workers) generally much better off financially than they were post-2008, and continued fiscal and monetary support from the government. The latest soft spots in the data, though, do serve as a reminder that the sooner the coronavirus outbreak can be brought under control the quicker and more robust the rebound in economic activity will be.
Sources: Econoday, U.S. DoC, U.S. DoL, FRBSL