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
With a slow vaccine rollout so far, how has the government changed its approach?
On Tuesday, Jan. 12, Health and Human Services Secretary Alex Azar announced changes to how the federal government is distributing vaccine doses. The CDC has expanded coronavirus vaccine eligibility to everyone 65 and older, along with people with conditions that might raise their risks of complications from COVID-19. The new approach also looks to reward those states that are the most efficient by giving them more doses, but critics say that won’t address underlying problems some states are having with vaccine rollout.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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