The US economy has made dramatic progress since the coronavirus pandemic brought activity to a near-standstill this time last year, according to a new monthly economic review, with more vaccines in arms, federal stimulus putting money into pockets and consumers shopping again.
“The economy has come a long way compared with a year ago,” says Jack Kleinhenz, chief economist at the National Retail Federation (NRF). “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.”
Kleinhenz’s remarks come in the April issue of NRF’s Monthly Economic Review, which said conditions have improved dramatically after the unpredictable shock of the pandemic brought widespread shutdowns of retailers and other businesses beginning in March 2020.
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’s report. 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 US$122.9 trillion.
Kleinhenz says the increase in net worth came as home values rose and savings accumulated as consumers stayed home rather than eating out, travelling, 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 notes.
While the economy is stronger, the recovery has been uneven, he adds. Despite continuing gains, employment remains soft with around 10 million still out of work and unemployment at 6.2%. 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 says he agrees with Federal Reserve officials who believe higher prices are unlikely to be sustainable. Supply will catch up with demand, the labour market is keeping wages in check and competitive eCommerce is limiting sellers’ pricing power, he says.
NRF has forecast that 2021 retail sales – excluding automobile dealers, gasoline stations and restaurants – will be 6.5-8.2% higher than in 2020 to between $4.33 trillion and $4.4 trillion. That could top 2020’s growth of 6.6%, which broke the previous record of 6.3% set in 2004 despite the pandemic.