The National Retail Federation, the lobbying arm and booster for retailers, isn’t about to “sugar coat” the outlook for business amid the pandemic.
“We expect a severe contraction, and if the nation doesn’t get the virus under control, the fallout will be worse,” NRF chief economist Jack Kleinhenz wrote in the April issue of the NRF’s “Monthly Economic Review.”
“With shelter-in-place or stay-at-home directives, retail foot traffic is nearly nonexistent,” Kleinhenz said. “This is a serious time for retail firms as they try to sustain themselves, but the loss of income for both consumers and businesses is not distributed evenly. Some ‘nonessential’ retailers will see huge losses and many retail workers will lose their jobs. Yet other ‘essential’ merchants will benefit from stable revenues and their workers will have secure jobs as they try to keep up with the demand for goods and services.”
Kleinhenz also warned that retail sales data for March — the first month when the outbreak had fully hit the U.S. — could be unreliable because many retailers whose businesses had closed were not in the office to reply to the Commerce Department’s monthly survey of sales results. So it could be some time before there’s reliable data revealing just how hard retailers have been hit financially by the pandemic.
Nevertheless, Kleinhenz underscored that while the coronavirus pandemic “has triggered shocks,” the underlying economy is healthy. He wrote that the U.S. economy benefited from “sound fundamentals” going into the COVID-19 crisis, including sturdy employment gains, low inflation and high consumer confidence, and wasn’t “broken” like it was during the Great Recession of 2007-09. “Once the pandemic is over, we hope we will find that there is nothing structurally wrong with the economy and that any deficiencies were solved by monetary and fiscal policies,” Kleinhenz said.
Recent actions by the Federal Reserve and Congress, including the loans, tax relief and checks for consumers in the Coronavirus Aid, Relief and Economic Security Act signed into law last week, will help by providing liquidity and keeping credit available for retailers and other businesses, Kleinhenz said.
Still, “All the policy we throw at this will not help unless we reduce the public health risks,” Kleinhenz said.
Gross domestic product that was growing at a 2.1 percent annual rate at the end of 2019 is “about to go into a mandated nosedive,” according to Kleinhenz.
He cited several troublesome statistics, including unemployment claims which “soared” to 3.3 million during the week ending March 21, nearly five times the previous record of 695,000 set in October 1982. “With millions out of work across economic sectors and stores and restaurants closed to promote social distancing, retail foot traffic is nearly nonexistent,” said Kleinhenz.
“Nonetheless, we do not believe today’s situation presages a prolonged economic downturn,” said Kleinhenz. “Once the pandemic is over, we hope we will find that there is nothing structurally wrong with the economy and that any deficiencies were solved by monetary and fiscal policies….The big question is, ‘can we get back to normal and how soon?'”