As Washington debates what — and whether — a Phase 4 bill should be, the economy has continued to grow without any government support. Thanks to the effort to slowly expand the reopening of commerce in most states, consumers continued to increase their retail spending in August, if not quite to the same rate of increase as July.
Thus far, though, it still appears that the gains are mostly on-line rather than at brick-and-mortar stores, but restaurants are making a comeback:
Advance estimates of U.S. retail and food services sales for August 2020, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $537.5 billion, an increase of 0.6 percent (± 0.5 percent) from the previous month, and 2.6 percent (± 0.7 percent) above August 2019. Total sales for the June 2020 through August 2020 period were up 2.4 percent (± 0.5 percent) from the same period a year ago. The June 2020 to July 2020 percent change was revised from up 1.2 percent (± 0.5 percent) to up 0.9 percent (± 0.2 percent).
Retail trade sales were up 0.1 percent (± 0.5 percent)* from July 2020, and 5.1 percent (± 0.7 percent) above last year. Nonstore retailers were up 22.4 percent (± 1.4 percent) from August 2019, while clothing and clothing accessories stores were down 20.4 percent (± 1.9 percent) from last year.
The year-on-year gains are more impressive than the month-on-month gains, which is a sign of a return to normalcy. However, the year-on-year figures do point out where the shortcomings in this recovery remain. Traditional retail outlets like department stores (-16.9%), clothing and accessory stores (-20.4%), food services and drinking places (-15.4%), and gas stations (-15.4%) are still struggling to get through the turndown in in-person commerce.
Most of them also had losses month-to-month as well, but both food services (4.7%) and clothing/accessory stores (2.9%) had impressive rebounds in July. That indicates some consumer confidence is still returning to the economy:
Still, retail sales continued to grow, now for the fourth month in a row as people spent more at restaurants and bars and bought more furniture, electronics, cars and clothes. And for the first time in months, online stores saw no growth.
After a near-collapse in the spring because of the coronavirus pandemic, spending at stores and eateries has been above last year’s levels since June. August sales were 2.6% compared to a year earlier, the Commerce Department said Wednesday.
Retailers had braced for the moment when the boosted unemployment checks would stop arriving after July. That money was seen as a major force behind the summer’s big upswing in retail spending, which includes gasoline, cars, food and drink. More than 29 million people still collect unemployment benefits and job growth has slowed steadily since early summer.
So far, the answer appears that the expiration of benefits didn’t do much damage at all to the recovery. That may be why the Fed sounds a lot cheerier than they did a couple of months ago about the economy’s future over the next year. By the end of 2021, the Fed expects unemployment to drop back to 5.5%:
Federal Reserve leaders predict that unemployment will fall to 7.6 percent by the end of this year, and to 5.5 percent by the end of 2021, even as much about the path of the novel coronavirus and its influence over the economic recovery remain unknown.
As the Fed concluded two days of policy meetings Wednesday, the projections suggest Fed leaders are growing more optimistic about the recovery than they were earlier this summer. By 2023, policymakers’ projections put the unemployment rate at 4 percent.
“The recovery has progressed more quickly than generally expected,” Fed Chair Jerome H. Powell said at a news conference. “Even so, overall activity remains well below its level before the pandemic, and the path ahead remains highly uncertain.”
The Fed won’t take any chances on it, though. They plan to keep money cheap for the long term:
At the same time, the majority of Fed officials expected the benchmark interest rate would stay at or near zero through 2023. The Fed also said it would increase holdings of Treasury securities and agency mortgage-backed securities at the current pace, which officials say is helping stave off an even deeper financial crisis.
Under these circumstances, a rational stimulus policy would aim very narrowly at ways to reopen businesses and schools fully. Politically, though, it’s still the “free stuff” season, and Donald Trump amplified that expectation yesterday. We’ll have more on the aid package later, but don’t be surprised if all sides end up embracing the $1.5 trillion Problem Solvers compromise — and quickly.
Update: Weekly jobless claims declined slightly last week, but almost a million people came off the benefit rolls (emphasis mine):
In the week ending September 12, the advance figure for seasonally adjusted initial claims was 860,000, a decrease of 33,000 from the previous week’s revised level. The previous week’s level was revised up by 9,000 from 884,000 to 893,000. The 4-week moving average was 912,000, a decrease of 61,000 from the previous week’s revised average. The previous week’s average was revised up by 2,250 from 970,750 to 973,000.
The advance seasonally adjusted insured unemployment rate was 8.6 percent for the week ending September 5, a decrease of 0.7 percentage point from the previous week’s revised rate. The previous week’s rate was revised up by 0.1 from 9.2 to 9.3 percent. The advance number for seasonally adjusted insured unemployment during the week ending September 5 was 12,628,000, a decrease of 916,000 from the previous week’s revised level. The previous week’s level was revised up 159,000 from 13,385,000 to 13,544,000. The 4-week moving average was 13,489,000, a decrease of 532,750 from the previous week’s revised average. The previous week’s average was revised up by 39,750 from 13,982,000 to 14,021,750.
This shows a slow but continuing improvement in the job market, albeit still with far too much churn and chaos. Until we get back to a fully reopened status, employers will continue to have issues keeping personnel on payrolls.