Saturday, August 15, 2020

Happy Consumers Are the Key...


Popular Economics Weekly


Are we heading for a fall in the Fall when the ordinary flu season begins? The chickens may be coming home to roost, as the saying goes, because the US economy opened to soon.

Retail sales rose 1.2 percent in July, the government said Friday. Economists polled by economists had forecast a 2 percent advance. Receipts have slowed from a 8.4 percent increase in June and a record 18.3 percent gain in May when the economic rebound began. In other words, consumers may be seeing the writing on the wall as we approach the cold season.

And CDC director Robert Redfield just warned in a WebMD interview on Wednesday that America is bracing for “the worst fall, from a public health perspective, we’ve ever had.”

This is not because cooler weather somehow makes the coronavirus worse, or that the summer’s heat kills the virus, which has been a common misconception about the coronavirus causing the disease COVID-19. Rather, fall and winter become influenza’s time to shine.

We are stuck at the highest unemployment rate achieved during the Great Recession (10 percent) that ended in 2009 in July’s unemployment report. But it took until 2018 to return to anything resembling full employment (4 percent), another 8 years, as I said last week.


So will it take this long to return to full employment again? So far we have only restored about 9.3 million jobs, leaving more than half of the Americans who lost their jobs still unemployed, and the flu season is about to start that historically kills between 12,000 and 61,000 deaths a year.

“We’re going to have COVID in the fall, and we’re going to have flu in the fall. And either one of those by themselves can stress certain hospital systems,” Redfield said, noting that many hospitals have already been overwhelmed by the number of coronavirus patients. There have also been reports of hospitals in New York, Texas and Arizona calling in refrigerated trucks to serve as temporary morgues to handle the number of dead bodies during the pandemic. And the ordinary flu has seen between 140,000 and 810,000 people hospitalized each year since 2010.”

Retailers have been on a roller-coaster ride since the pandemic began, sinking in March and April and recovering rapidly in the following two months as the economy reopened. The more mild increase in sales in July (+1.2%) might be a sign of what lays ahead, however.

And consumer sentiment has stagnated; another sign that consumers are becoming more cautious as the flu season hits at the same time as schools normally open. The preliminary reading of the consumer sentiment survey in August edged up to 72.8 from 72.5 in July, but it’s still just barely above the pandemic low, the University of Michigan also said Friday.

And we know what can happened next, since children will bring those virus bugs home to parents and grandparents as schools re-open. Economists such as Nobelist Paul Krugman are becoming ever more worried that this could turn what, to date, has been a mild recession into a Great Depression.

Harlan Green © 2020

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