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COVID-19

Early signs of an improving economy, but consumers haven’t opened their wallets

Mitchell Hartman May 29, 2020
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Anxiety about personal finances is still sky-high. David McNew/Getty Images
COVID-19

Early signs of an improving economy, but consumers haven’t opened their wallets

Mitchell Hartman May 29, 2020
Heard on:
Anxiety about personal finances is still sky-high. David McNew/Getty Images
HTML EMBED:
COPY

It’s confirmed: The bottom fell out on consumer spending during sheltering in place April. The government says spending fell 13.6%. Meanwhile, the personal savings rate hit a historic 33% in April, up from 12.7% in March.

For May, there are signs spending may be picking up slowly. Consumers are now feeling slightly more confident about the economy overall. The University of Michigan’s index for May, however, shows consumer sentiment has remained largely unchanged.

And people’s anxiety about their own personal finances is still sky-high, says economist John Leer at polling firm Morning Consult.

“Millions of Americans have filed for unemployment insurance, it’s unclear whether or not those workers are still able to meet their basic spending needs,” Leer said.

And Leer says about half of those who’ve lost jobs or had their hours cut, aren’t even getting benefits.

Heidi Shierholz at the Economic Policy Institute says that’s sapping confidence, too.

“That means that they are trying to subsist on much lower income. They’re going to have to cut their spending and it will make the recession worse,” Shierholz said.

Consumers remain very concerned about COVID-19 continuing to spread. As a result, “we will not see any sort of a rebound in consumer spending in the near-term,” Leer said.

That’s at least until consumers are more willing to go out to dine and shop again.

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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