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Consumer prices didn’t rise in October. That may not be good news.

Mitchell Hartman Nov 12, 2020
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Customers shop at an Arizona mall in June. Flat prices across the economy might be a sign of weakness. Christian Petersen/Getty Images
COVID-19

Consumer prices didn’t rise in October. That may not be good news.

Mitchell Hartman Nov 12, 2020
Heard on:
Customers shop at an Arizona mall in June. Flat prices across the economy might be a sign of weakness. Christian Petersen/Getty Images
HTML EMBED:
COPY

After four straight months of increases, consumer prices held steady in the month of October, according to figures out Thursday from the Labor Department.

Sounds like good news for a pandemic-ravaged economy, right? But steady prices — even falling prices, in some cases — tell the story of an economic recovery that’s losing steam. It’s all a matter of supply and demand.

We’ve seen this supply and demand push and pull on prices right through the pandemic. Remember back in the summer when COVID-19 shut down food-processing plants and there were meat shortages? Supply fell and meat prices went up.  

Now consumer demand in the economy is weakening and holding prices down. 

With COVID surging, consumers don’t want to go out and spend money. And they may not be able to, said economist Dan North at credit insurer Euler Hermes North America. 

“Restrictions — they’re already coming in some states,” he said. “It’s going to shut down significant parts of the economy like it did before, and it’ll make consumption very difficult.”

Fear of more job and income losses is also keeping demand down, said Sam Stovall, chief investment strategist at CFRA Research.

“A lot of people are still very worried about overspending,” Stovall said. “If they do have a job, they’re worried about being furloughed with the additional spike in COVID.”

“We’re running into the end of the year; we’ve got an income cliff coming up for a bunch of people,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. The “income cliff” he’s referring to is the expiration of federal pandemic unemployment benefits at the end of the year. That adds up to billions a week in payments to more than 13 million Americans. 

And that’s not all that’s set to run out. 

“It’s not just the income. It’s the prohibition of evictions [and] foreclosures,” McMillan said. “In other words, there’s a lot of financial damage that isn’t showing up on the radar right now, but will start to show up very shortly.”

Unless, McMillan said, Congress extends those payments and protections before they expire in December.

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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