The past few months of economy’s records about the US and other countries have been grim. However, the country’s employment and also retail sales reports for June indicate recovery from the Covid-19. The US economy is mainly showing signs of improvement from April due to the relaxation of social distancing norms and also massive stimulus rollouts. These are likely to influence even the next half of 2020, with some irritants popping out during recovery.
With the availability of widespread vaccine by the first part of 2021, the regular economic activity can be back on track not just in the USA but also in other nations. Meanwhile, financial aid is acting as a shield for the economy against the virus attack. The stimulus has led to an increase in private earnings. While additional income is taking care of spending, the savings are looking after the household and also the company’s expenses, creating a stable ground for recovery. The speculations around the long-term adverse effect on the economy have also calmed down after noticing the spike in employment rate after the mayhem in May. There is an overall atmosphere of optimism around catching up growth in the coming years. By 2024, the US GDP should bounce back to only 1% less than the pre-pandemic calculations.
Retail sales in May
Barring restaurants, retail sales in May have jumped to just 4% below January 2020 levels. Retail sales are only 1% low after excluding the transactions from the gas station. In April, retail sales spiraled down to a level worse than the time of the Great Recession, recording an 18% loss. During any usual financial meltdown, consumers stop spending their money on expensive items, like furniture, vehicles, appliances, and also electronics. 2020 witnessed that as people became careful with their spending. The effect is palpable in the auto sector, which saw a 35% decline in sales from January through April despite the fact auto dealers ran their operations in the lockdowns due to the less risk of virus transmission in their setting.
The drop in auto sales can be attributable to concerns around economic uncertainty compared to social distancing. In May, there has been a strong positive response from the consumer’s side in this sector.
Employment losses as against prior recessions
The disruption in the country’s labor markets has probably been the highest compared to the economic meltdown that happened after World War II. The employment to population equation was down to 51.3%, with job losses increasing to 14.7%. The only difference this time from other recessions lies in the type of job losses. Typically, construction and manufacturing industries suffer the most during a slowdown, thereby reporting huge unemployment issues. It is easy to expect also because private investment and consumer goods spending go down. But this time, the private services sector was the main driver of the loss of employment.
As much as 77% of job losses occurred in the worst-hit industries, including restaurants, hotels, personal services, and others. However, on the positive side, there has been a noticeable jump in the number of jobs in May after the social distancing rules relaxed. From this, one can hope for quick job recoveries once the social distancing ultimately ends and also industries fully resume.
Overall, it is interesting to see companies, and also households are focusing on savings, which will bolster growth in spending. As per estimates, domestic private income post-tax will likely boost by 9% in 2020 even though there is a sharp decline in GDP.