How fast can the economy restart? It depends on how consumers feel
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How do you reopen an economy that’s been shut down to fight a pandemic? As the threat posed by the coronavirus begins to level off, that’s the next big question on the agenda.
The White House is aiming to get the “grand reopening” underway by May 1, while many states are planning to take a go-slow approach to lifting stay-at-home orders.
Whatever political leaders decide, restarting the economy will also depend on consumers — how people will feel about going into stores and restaurants again. We’re all probably going to have to get used to a new normal.
Personal consumption is a huge driver of the U.S. economy, accounting for around 70% of GDP. That means the people who buy goods and services — really all of us — are key, said David Garfield, managing director at consulting firm Alix Partners.
“How consumers think, feel and act in response to economic reopening will be pivotal,” Garfield said. There’s still so much uncertainty around timing and whether there could be another spike of COVID-19, he added, but some early signs show people want to spend.
“There will certainly be some pent-up demand for consumer goods and services in some areas — haircuts and trips to the dentist, for example,” Garfield said.
And of course, people have been missing trips to the movie theater and their favorite restaurant, too. But it’s not so clear if they’ll rush back to those places.
Denise Dahlhoff, senior researcher for consumer research at the Conference Board, said businesses will have to work to make people feel safe.
“That includes providing disinfectants. It might include having mandatory masks, and maybe even gloves, at the store,” Dahlhoff said.
Another concern for many consumers will simply be financial. The millions of Americans who have lost their jobs and others who are feeling insecure might not feel like spending.
Ravi Dhar, director of the Yale Center for Customer Insights, warns that asking people to predict how they’ll feel later while we’re still in the middle of this crisis can be misleading.
“Because what people predict is really based on what they’re thinking and feeling at the moment,” Dhar said.
Right now, people might be frustrated at home and predict they’ll head out and start spending right away. But what they will actually end up doing will be driven by how confident they feel when stay-at-home orders are lifted.
COVID-19 Economy FAQs
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
Are people still waiting for unemployment payments?
Yes. There is no way to know exactly how many people have been waiting for months and are still not getting unemployment, because states do not have a good system in place for tracking that kind of data, according to Andrew Stettner of The Century Foundation. But by his own calculations, only about 60% of people who have applied for benefits are currently receiving them. That means there are millions still waiting. Read more here on what they are doing about it.
What’s going to happen to retailers, especially with the holiday shopping season approaching?
A report out Tuesday from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.
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