NRF’s Kleinhenz: ‘The Past 12 Months Have Been Unimaginable’
Jack Kleinhenz: “In March 2020, the unpredictable shock of the coronavirus pandemic brought about an unprecedented shutdown of the U.S. economy.”
The National Retail Federation’s (NRF) Chief Economist Jack Kleinhenz, who has a Ph.D. in economics from the University of Notre Dame, has seen a lot in his career. But from an economic standpoint, he has never seen anything like 2020.
“The past 12 months have been unimaginable,” Kleinhenz remarked in the April issue of NRF’s Monthly Economic Review. “In March 2020, the unpredictable shock of the coronavirus pandemic brought about an unprecedented shutdown of the U.S. economy.”
But a year later — with more vaccines in arms, federal stimulus putting money into pockets and consumers shopping again — the U.S. economy has made dramatic progress since the coronavirus pandemic brought activity to a near-standstill this time last year, Kleinhenz said.
“The economy has come a long way compared with a year ago,” he noted. “Both monetary policy set by the Federal Reserve and fiscal policy set by Congress and the White House have responded with swift and overwhelming force to support the economy. NRF is optimistic that the recovery is accelerating and the needed rebuilding of the economy is underway. The rate of vaccinations is ramping up, and the numbers paint an increasingly encouraging picture.”
This time a year ago, 22 million Americans had lost their jobs in two months, unemployment shot from a 50-year low of 3.5% to 14.7% and economic output fell by 31%, according to NRF. By contrast, more than half the jobs lost have been recovered, the Federal Reserve expects gross domestic product to grow 6.5% this year and household net worth is at an all-time high at $122.9 trillion.
Kleinhenz said the increase in net worth came as home values rose and savings accumulated as consumers stayed home rather than eating out, traveling or attending entertainment or sports events. The wealth “provides consumers with plenty of purchasing power” that will likely be seen across consumer-facing industries.
The new round of $1,400 stimulus checks currently being distributed under the $1.9 trillion American Rescue Plan Act are certain to “fuel another leg of growth,” although they could be split between spending, saving and paying down debt, Kleinhenz said.
But while the economy is stronger, the recovery has been uneven, Kleinhenz said. Despite continuing gains, employment remains soft with around 10 million still out of work and unemployment at 6%. Low-income workers and members of minority communities have been disproportionately impacted.
While some economists have expressed concern that the quickly growing economy could lead to inflation, Kleinhenz said he agreed with Federal Reserve officials who believe higher prices are unlikely to be sustainable. Supply will catch up with demand, the labor market is keeping wages in check and competitive e-commerce is limiting sellers’ pricing power, he said.
NRF has forecast that 2021 retail sales — excluding automobile dealers, gasoline stations and restaurants — will grow between 6.5% and 8.2% over 2020 to between $4.33 trillion and $4.4 trillion.