NRF’s Chief Economist: ‘Big Questions Are Looming’
After a surge in July, U.S. coronavirus cases across the U.S. are declining, although they are still higher than they were in the spring. The monthly July jobs report showed the U.S. economy added 1.8 million jobs, with the unemployment rate falling to 10.2% from 11.1%. It was slightly better than expected.
But despite broad indications that the economy has begun to recover as businesses reopen from the coronavirus pandemic, conflicting data makes it difficult to say how steadily the comeback will continue, according to National Retail Federation (NRF) Chief Economist Jack Kleinhenz said today.
“Optimism about the economy and retail spending is being tested daily with the spread of the coronavirus,” Kleinhenz said. “Big questions are looming, and we are all grappling to discern what incoming data is telling us about the health of the economy and consumers. Depending on the data selected, the answers are not entirely clear.”
Kleinhenz noted that a key question is whether the pace of growth and momentum will carry forward over the next few months.
“Based on quarterly and monthly data, the U.S. economic recovery continues despite elevated COVID-19 cases,” he added. “But in examining weekly data, the pace of improvement appears to be slowing. Could it be that we are at or heading back to the same spot we were at two months ago?”
Kleinhenz’s remarks came in the August issue of NRF’s Monthly Economic Review, which said monthly indicators showed the economy improving in May and June but that more frequent data showed the pace of recovery flattening by mid-July.
Economists traditionally look at monthly and quarterly numbers to gauge the status of businesses and consumers, but the release of that data lags weeks behind when it is collected, according to NRF. And with the situation changing rapidly since the outbreak of the coronavirus early this year, more frequent information has been needed to keep up. In response, the Federal Reserve and others have begun tracking some indicators as often as weekly.
Consumer spending was up 8.2% in May, for example, ending two consecutive months of decline, and up another 5.6% in June. Meanwhile, retail spending as calculated by NRF — excluding automobile dealers, gasoline stations and restaurants to focus on core retail — was up 4.9% in June. Monthly numbers for July aren’t available yet, but the Federal Reserve Bank of New York’s Weekly Economic Index cited a decrease in retail sales from July 18-July 25.
While many of the weekly reports initially agreed with the monthly data and “showed the economy on a good start down the recovery runway, they now suggest that the economy is moving sideways,” Kleinhenz said.
“Time will tell, but the bottom line is that the economy is far from being out of the woods,” he added. “The question is whether it is re-entering the woods.”
With many economists saying the timeline of the recovery will be determined by the efforts to control the virus, the NRF said the Federal Reserve Bank of Cleveland conducted a survey in early July that found 89.9 percent of those polled wear a mask for activities such as shopping in a grocery store. The bank said it conducted the survey because masks “have the potential to help reduce the spread of COVID-19 without greatly disrupting economic activity.”