By Joe Higgins
I have always used historical information when making predictions about our economy, it was fun and it was easy, that is until America experienced a global pandemic, the recession that followed, changed everything. With so little precedent to look back on, this article is the best information I have in a very uncertain world.
Let’s begin with the virus.
The virus has continued to wreak havoc on the economy, mid America is now experiencing a rise in Covid 19 cases and the hospitalization rates have increased over the past 30 days. As of the first week of October, 39 states are showing increases in the infection rates. The bad news, hospitalizations rates are up, the good news, fewer patients are dying thanks to the knowledge we have gained during the last 8 months in treating the virus and saving lives. The next impact could bring more pain as cold weather arrives along with the seasonal flu, at some point we will be dealing with two viruses at a time when many of us will begin spending extensive time indoors. This is a wait and see situation, I have no crystal ball to predict the spread of the virus.
So what has happened since we last connected?
Let’s begin with Consumer Confidence, the Consumer Confidence Index increased 15.5 points in September to 101.8. The baseline forecast I predicted was 96.1 and I thought that was a little high, so this increase is significant. This level of confidence on the part of consumers is very encouraging and easily beat the consensus number of 91.4 but even with this strong reaction from consumers, I am concerned about the state of the job market, the increase in infection rates and the absence of fiscal relief for the 11 million unemployed Americans. This will be a drag on what is already a weak economic situation.
The real question for me is, why are Americans so confident and will they remain in this positive frame of mind. This will determine just how long our current expansion will last.
Here is the good news for our dealers, respondents to the September Consumer Confidence survey indicated they were more likely to make big purchases in the months ahead. The share expecting to buy major appliances rose to a seven-month high of 49%, up from 44.9% last month. Those planning to buy a car increased from 10.2% to 11.1%, and even more intended to buy a home. Confidence usually translates to consumer spending, so we track this indicator very closely. I fully expect the appliance business to remain active and robust throughout this pandemic.
The jobs report was out this week and the U.S. economy added 661,000 jobs in September, this number was below economist’s estimate of 800,000, I see this as a sign that the rebound from the springtime recession could be slowing. The unemployment rate fell to 7.9%, but that was mostly due to a sharp decline in the labor force participation rate. While 7.9% is more than double what is was pre-pandemic, it far better than the 14% level of unemployment we reached in April.
It’s interesting, in pre-pandemic days I would have called this a sign of a robust job market. The total, in fact, would have been the best month the U.S. in almost 30 years but the Covid 19 era has changed the benchmarks by which we measure economic statistics.
Retail was again the bright spot in September with a net addition of 142,400 jobs. Economists see this segment of the economy having significant growth throughout the year and into 2021 as Americans continue to shelter at home and spend money remodeling.
At the moment, the economy remains mostly in an expansion period after a historic slump in the second quarter brought on by the coronavirus-induced shutdown. The Atlanta Fed is predicting GDP growth of nearly 31.8% annualized pace in the third quarter after tumbling 31.4% in Q2 and declined 5% to start the year.
An economic downturn is more likely in Q4 as more business finally start to cut jobs and maybe close operations for good. A similar pattern is happening across dozens of industries, employing of millions of workers.
Like I said, it is rough making predictions in a pandemic, but hang in there, the home goods industry is poised to stay strong throughout this moment in our history.
Joe Higgins is a 42-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant and public speaker. Joe is a regular contributor to YourSource News. Visit his website, Quest 4 Quality with Joe, at www.q4qwithjoe.com.