With America still stuck in a severe recession, retailers are looking for signs that returning customers will help turn the economy around.
It was only in June that the National Bureau of Economic Research officially declared that the United States economy had entered a recession back in February, starting with that month’s stock market crash and continuing with the Coronavirus lockdowns.
We may have already seen the worst, according to National Retail Federation Chief Economist Jack Kleinhenz. “While it would be unusual for a recession to last less than six months, it is possible that the current one could have already ended with May’s rebound,” he said.
“The good news is that the recession may have ended as fast as it started. The bad news is there is plenty of uncertainty on the shape of the reopening of the economy, and the recovery will be slow even if we are no longer in recessionary territory.”
The Conference Board’s Consumer Confidence Index rose in June to 98.1 compared to 85.9 in May. This is a marked improvement, although it remains well below pre-pandemic levels, and general economic conditions continue to be weak by other measure, the board explained.
The stock market is usually seen as a leading indicator that the economy is recovering from a recession, and has seen a strong recovery since its
February crash, closing out its best quarter since 1998 at the end of June and recovering most of the first quarter’s losses, Kleinhenz pointed out.
While citing upward trends, Kleinhenz emphasized that the economic recovery will still be dictated by whether efforts to end the pandemic are successful.
“Before we prematurely celebrate the return of the consumer, the wave of new coronavirus outbreaks spreading throughout the country are a major threat to the recovery,” he said.
“These outbreaks are alarming, and if they accelerate will certainly sway consumer and business confidence, taking a toll on output and employment and prolonging the time it takes to achieve a true economic recovery.”
The employment figures for June were another positive sign. Made public by the government after NRF issued its report., they showed total nonfarm payroll employment rose by 4.8 million in June, and the unemployment rate declined to 11.1% following an increase of 2.7 million in May.
Retail was one of many segments that saw gains. In June, it gained 740,000 workers, following a gain of 372,000 in May and losses totaling 2.4 million in March and April combined. On net, retail employment is 1.3 million less than in February.
In June, notable job gains occurred in clothing and clothing accessories stores (202,000), general merchandise stores (108,000), furniture and home furnishings stores (84,000), and motor vehicle and parts dealers (84,000).
(Transportation and warehousing added 99,000 jobs in June, following declines in April and May totaling 588,000. Employment rose by 61,000 in warehousing and storage; 21,000 in couriers and messengers; 8,000 in trucking and 7,000 in transportation support activities.)
Keep in mind that while all job categories saw employment improvement in June, the 11.1% unemployment rate remains at a near depression level. Payrolls are still down a devastating 19.6 million from February, Kleinhenz pointed out.
“The job market is the most important indicator regarding the recovery, but the data unfortunately tells us more about losses than hiring and not much about the difficulty of finding a job. How fast jobs come back is directly connected to how much consumers are willing to spend, and full recovery is a long way off.”
Overall retail sales were up 17.7% seasonally adjusted in May from April, but still down 6.1% year over year. May sales were up 11% from April and up 1.7% year-over year. (NRF excludes automobile dealers, gasoline stations and restaurants from its sales measurements).
Other sources appear to confirm NRF’s view, Kleinhenz said.. The Dallas Federal Reserve index showed the economy was in a contractionary mode since February, but consumer activity appears to be rising recently, suggesting a bottoming out.
This correlates closely with the New York Fed’s Weekly Economic Index, which has consistently concluded that a recovery is at hand.
Kleinhenz finished his July 1 report with what could be a prescient warning: “Before we prematurely celebrate the return of the consumer, the wave of new coronavirus outbreaks spreading throughout the country are a major threat to the recovery.”
He stressed, “These outbreaks are alarming, and if they accelerate will certainly sway consumer and business confidence, taking a toll on output and employment and prolonging the time it takes to achieve a true economic recovery.”