Washington has pumped trillions of dollars into the economy — supporting businesses and the stock market — but the continuing crush of job losses is rattling investors.
The Dow Jones Industrial Average slumped 202.35 points, or 0.9 percent, to 23,045.65 Thursday morning after another three million people went onto U.S. unemployment rolls last week, according to the Labor Department. (The stock market is now 22 percent down from its all-time high set on Feb. 12).
That brings the two-month tally to 36.5 million — an unprecedented spike in unemployment claims that has reordered the consumer landscape.
Employment is seen as the single-biggest factor in spending and the unemployment rate has just spiked from a 50-year low of 3.5 percent in February to a nearly off-the-charts 14.7 percent in April.
With millions furloughed in the interest of social distancing, the hope is that many of the people who were sent home without pay will be called back.
But just how many actually do come back is a growing question.
Even as many companies start to tiptoe back into business in areas that have eased out of the lockdown — such as Georgia and Texas — it’s clear that they’re opening back up into a new reality.
Nordstrom Inc., for instance, is permanently closing 16 of its department stores, or 13 percent of the 116 doors it had headed into the COVID-19 shutdown.
Multiplying those cuts across the economy lays out a tough road ahead for shoppers and retailers.
Forecasting firm IHS Global Insight recently forecast an “epic” 37 percent drop in second-quarter gross domestic product and said it would take two years for the economy to get back to its prior peak.
“On balance, we expect consumer spending to contract at a 43 percent rate in the second quarter and roughly 8 percent this year,” said Joel Prakken, IHS’s chief U.S. economist.
All this is sinking into the stock market, where investors have been heartened by aid from Washington — including loans to businesses and unemployment support for workers — but are also girding for a long slog ahead.
Among the retailers losing ground on Thursday morning were Capri Holdings, down 5 percent to $12.26; Tailored Brands Inc., 4.8 percent to 93 cents; Guess Inc., 3.9 percent to $6.74; Chico’s FAS Inc., 3.6 percent to $1.08; Macy’s Inc., 3.5 percent to $4.85; Levi Strauss & Co., 2.5 percent to $11.56, and TJX Cos. Inc., 2.4 percent to $42.99.
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