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Consumer spending numbers for January came out Friday, a mere 0.2% bump in January. That’s the month when the coronavirus headlines started coming. Incomes did jump upward, however — 0.6%, the biggest gain in nearly a year.
Consumers have been responsible for a lot of the recent economic growth. But now we’re dealing with a global health concern.
Consumer spending makes up about 70% of the U.S. economy, so any disruption would have dire effects on growth. But Jack Kleinhenz, chief economist at the National Retail Federation, says consumers are still in a good place right now.
He said Americans are saving at almost 8%, up from about 6% in 2009. And when people save, they also may be spending.
“Their income has exceeded their consumption in the last few quarters, which leaves a net benefit of saving,” Kleinhenz said. He added that low interest rates are also driving people to buy homes and refinance their mortgages.
But January’s report may not reflect consumer spending in the wake of COVID-19 which, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank, is the real wild card right now.
“With a pretty resilient labor market, you would think that the consumer outlook remains sturdy, except for these worries about the impact of the coronavirus,” Luzzetti said.
He said spending on things like eating out, concerts, live sporting events and other entertainment could be the first to suffer — even without a broad outbreak in the United States.
COVID-19 Economy FAQs
Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?
This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.
Could waiving patents increase the global supply of COVID-19 vaccines?
India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy continues reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
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