The economic volatility stemming from the pandemic has turned good news into just lagging indicators.
While U.S. gross domestic product for the third quarter was revised up slightly to 33.4 percent by the Commerce Department, fourth quarter GDP is likely to be impacted by ongoing coronavirus infections what appears to be increases in first-time jobless claims.
Growth in the third quarter was fueled in part by over $3 trillion in pandemic relief, bringing initial third-quarter gains to 33.1 percent before the revision. That was a significant turnaround from the 34.1 percent contraction in the second quarter, when many nonessential retailers were temporarily closed at the start of April to help curb the spread of Covid-19. Retailers, such as department stores and specialty chains, began reopening in early May but limited services to curbside delivery. Many didn’t complete the gradual reopening process until June, and that was only after they instituted new procedures such as social distancing and sanitizing protocols.
While Congress on Monday night approved another aid package for $900 billion, the stimulus coming so late in the year probably won’t help fourth quarter GDP. And it might not do much to help in the first quarter of 2021. Americans who qualify to receive a check will get only $600 this time around, although the relief package will extend certain benefits that were set to expire or had already expired, such as federal unemployment benefits and the supplemental assistance program for food relief known as SNAP.
The incoming administration under President-elect Joe Biden will have to push for more aid for small businesses and even relief funding for state and local governments, which was nonexistent in the current package and could portend more municipal layoffs in the months ahead.
“Retailers are encouraged by the passage of this economic relief package that will keep the economy open and moving in the right direction as the fight against the Covid-19 pandemic continues. The additional stimulus and extension of expired relief measures will help protect families, support health care providers and sustain small and independent businesses,” Matthew Shay, president and CEO of retail trade organization the National Retail Federation, said. “The November retail sales report shows that consumers held back on spending, and more robust stimulus is needed to shore up our economy. These are trying times for many American families, and a strong stimulus bill is critical to the continued recovery of the economy and the retail industry, which creates employment for 52 million working Americans.”
Shay added that the retail industry has invested billions of dollars throughout the pandemic to ensure the health and safety of employees and customers. He said that the NRF will continue to advocate for financial relief for American workers, families and businesses impacted by the coronavirus. “Our hope is this latest stimulus will be a down payment on economic relief next year,” Shay said.
Steve Lamar, president and CEO of the American Apparel & Footwear Association, said that more will need to be done to support the U.S. economy in 2021.
“Covid-19 has wreaked havoc on our world and created an economic crisis unlike any previous. While this new bill provides essential aid, it is only a down payment on what the American economy needs to make it to the other side. The job is not done, and more work will be needed in 2021. This will be job one for the incoming administration and the new Congress, and we look forward to working with them, and our diverse coalition, to save the American economy,” Lamar said.
The U.S. now has more than 18 million reported cases of the virus. So far, there have been 319,763 American deaths. Those numbers are expected to increase in the weeks ahead following the Christmas holiday period. And in spite of the start of Covid vaccinations globally, most require a second shot three or four weeks after the first, depending on which vaccine is received.
First-time jobless claims in the U.S. have also been on the rise again. An increase was expected for the week ended Dec. 3, mostly because of the difficulty in adjusting for the prior week’s Thanksgiving holiday. The report for Thanksgiving week said that new jobless claims totaled 712,000. The Dec. 10 report for the week earlier saw initial claims spike up to 853,000. The last report from the Labor Department on Dec. 17 saw claims rise again to 885,000 for the week ended Dec. 10. The next report is slated for Thursday for the week ended Dec. 17.
Consumers are feeling economic tension as well. On Tuesday, The Conference Board’s Consumer Confidence Index declined in December, on top of its decrease in November. The Index is now at 88.6, down from 92.9 in November. The indices in the Index were mixed in December. The Present Situation Index fell sharply to 90.3 from 105.9, while the Expectations Index, which measures short-term outlook over the next six months, rose to 87.5 from 84.3.
“Consumers’ assessment of current conditions deteriorated sharply in December, as the resurgence of Covid-19 remains a drag on confidence,” Lynn Franco, senior director of economic indicators at The Conference Board, said on Tuesday. “Overall, it appears that growth has weakened further in Q4, and consumers do not foresee the economy gaining any significant momentum in early 2021.”
The Conference Board’s economic forecast for the U.S. is pegging growth of 2.8 percent for the fourth quarter while the country continues to deal with the pandemic. Looking at 2021, it said key variables include the scale of the ongoing Covid resurgence and any resulting lockdowns, the status of labor markets, the timing of the Covid vaccine rollout and the degree to which volatility in the U.S. political transition affects consumer and business confidence.
While President-elect Biden has secured the required Electoral College votes, two runoff elections on Jan. 5 will determine which party controls the Senate. Two Senate seats are up for grabs, and Democrats, who narrowly control the House, are hoping for wins so they can have a Democratic sweep. Barring a Blue Wave win, the result will be a split government, with the Senate battling each economic growth measure or stimulus proposal from the House and incoming Administration.