A vital race is on between the coronavirus and the economy, and right now, it looks as though the economy (and all of us whose well-being depend on it) is winning. But let’s not celebrate too soon. There are some long laps ahead, and a lot can happen along the way.
The economy provided a taste of victory when the Census Bureau announced that May retail sales were up 17.7%, following an April 14.7% decline. Sales were still down slightly on a year-over-year basis, but even with auto shipments removed, there was still a 12.4% gain. This means auto production will soon be accelerating. There were large sales increases reported for clothing (up 188%), furniture (rising 89.7%), and sporting goods (up 88.2%). There’s no doubt about it: Consumers were out there shopping again.
The good news doesn’t end here, thankfully. Remember, there were 2.5 million names added to the nation’s payrolls in May. To put one more item on the “let’s be happy” list, housing markets are again becoming lively.
This said, we must recognize that until a vaccine is available, the coronavirus is still in the race, and recent news on a surge in new cases across 10 states tells us it is not down and out. We can see the effects of this in data reported by OpenTable. Available U.S. restaurant seats were just beginning to tighten again a couple of weeks ago as people went back to dining out. Then there was a reversal, and more seats opened on June 14. When the virus surges, people seem to react quickly.
Meanwhile, in tracking the race, we must keep an eye on the calendar. While the virus is still chugging away, the timing with which the economy opens is critical. For example, the $600 weekly federal unemployment supplement received by furloughed and discharged workers expires at the end of July. The approximately $600 billion in potentially forgivable Paycheck Protection Plan small-business loans that have largely been made must be spent, and primarily on wages, by the end of the year. Yet the $600 supplement stands in the way of rehiring workers, some of whom are understandably happier with the unemployment compensation than working for less, so that the wage-dedicated loans can be spent. That makes July 31 and then December 30 critical dates in the race.
Enriched by stimulus funds and enhanced unemployment benefits, personal income for everyone in the country taken together has surged. But most of the money is still in the bank. The reopening of retail shops, restaurants, and other places to spend money is a major accelerator for getting the economy, and all of us, ahead of the virus.
We can all hope that the economy continues to gain speed and that the virus count will head south, permanently.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
