NRF chief economist says latest stimulus package will help
January 11-17, 2021
Economic challenges brought on by the coronavirus pandemic will continue in 2021, but stimulus legislation signed into law just after Christmas will help maintain and accelerate the nation’s ongoing recovery, National Retail Federation Chief Economist Jack Kleinhenz said today.
“As we closed out 2020, it was an end to a whirlwind year whose challenging economic environment will almost certainly continue in 2021,” Kleinhenz said. “The coming year might be just as eventful as the economic recovery faces many uncertainties. Recoveries do not proceed in a straight line and the prospects for volatility over the next few months are high. Nonetheless, just like the old Timex watch commercials, the economy takes a licking but keeps on ticking.”
“We expect retail sales spending to see a boost from the new round of stimulus,” Kleinhenz said. “Consumers responded quickly to last spring’s stimulus checks, and distribution of the new checks will come at a critical time that will help carry 2020’s momentum into 2021.”
Legislation signed into law on Dec. 27 will provide one-time $600 stimulus checks to individuals making up to $75,000 a year and extends $300 weekly checks for the unemployed for almost three months. The new aid is particularly important to low-income families and the unemployed, who have faced challenges paying day-to-day bills in recent months, Kleinhenz said.
Kleinhenz’s remarks came in the January issue of NRF’s Monthly Economic Review, which said economic activity will likely pick up after the winter months and into mid-year as COVID-19 vaccines allow more activities to resume. The availability of a vaccine during the first quarter – historically a soft spot in the economy every year even without a pandemic – “couldn’t be better,” he said.
Even though full recovery has yet to come, the economy has made considerable progress. Retail sales for the first 11 months of 2020 (excluding automobile dealers, gasoline stations and restaurants) were up 6.6 percent over the same period in 2019 and November’s year-over-year increase of 8.8 percent put the holiday season on track to meet NRF’s forecast of between 3.6 percent and 5.2 percent growth, the report said. Results for the full holiday season will be known when the Census Bureau releases December’s numbers on January 15.
Some of the money normally spent on traveling, dining out and entertainment shifted from services to goods in 2020, especially big-ticket home-related items like appliances and furniture, the report said. Rising wealth from increasing home values and stock prices have supported additional consumer purchases of retail goods, and the new stimulus checks should encourage consumers to “reengage” on non-durable goods and services.
While consumer spending and retail sales have largely returned, results have varied among retail sectors and “economic uncertainty is very prevalent and at near-record levels,” the report said. Overall economic activity is not expected to return to pre-pandemic levels until late 2021 and employment at pre-pandemic levels is unlikely to return until well into 2022 or possibly 2023.
Nonfarm jobs in Arkansas down 41,000 from a year ago
Closer to home, the Creighton University Mid-America Business Conditions Index, a leading economic indicator for the nine-state region stretching from Minnesota to Arkansas, fell for a second straight month but remained above growth neutral for the month.
In April of this year, COVID-19 pushed the overall index to its lowest level in 11 years. Since April, the overall index has climbed above growth neutral 50.0 for seven of the past eight months. The Business Conditions Index, which ranges between 0 and 100, dropped to 64.1 from November’s 69.0.
Creighton University’s highly watching monthly economic survey results have mirrored the national manufacturing survey results indicating that the manufacturing sector has been expanding at a solid, but slowing, pace since sinking to a post-2008 recession low in April. “Even so, current output in the regional and U.S. manufacturing sectors remains well below pre-COVID-19 levels,” said Ernie Goss, director of Creighton University’s Economic Forecasting Group.
The December Business Conditions Index for Arkansas increased slightly to 62.3 from November’s 62.2. Components from the December survey of supply managers included new orders at 64.9, production or sales at 60.9, delivery lead time at 76.6, inventories at 52.3, and employment at 56.7. Since the onset of COVID-19 in February, the Arkansas economy has lost a net of 41,000 nonfarm jobs, or 3.2%, according to the U.S. Bureau of Labor Statistics. The state’s top performing industry for 2020 was construction, which through October had added 1,200 jobs from a year ago.