Economic Update: Hold on to Your Hats!

By Joe Higgins, Quest 4 Quality

Highlights:

  • The Consumer Confidence Index increased nearly 20 points from February to March. It is a signal that a strong rebound is likely in 2021 and consumers will increase spending through year’s end.
  • Manufacturing in March increased at the fastest pace in 38 years, suggesting a strong recovery for the sector.
  • The U.S. economy brought back an astounding 916,000 jobs vs. expectations of 660,000. The unemployment rate dropped from 6.2 percent to 6.0 percent.
  • As of April 2, 54.3 million Americans were fully vaccinated against COVID-19. However, 23 states are seeing an increase in infections and cases of the coronavirus.

There was a convergence of consumer confidence, manufacturing and employment this week that pushed these three key economic indicators to levels unseen over the past twelve months.

Consumer Confidence

Let’s begin with the Consumer Confidence Index. This monthly indicator measures how consumers feel about their financial future and it increased nearly 20 points to 109.7 in March, up from 90.4 in February.  An increase of this size is extraordinary and signals that a strong rebound is likely in 2021 because Americans are becoming more optimistic about jobs, wages and the strength of the overall economy. A high degree of confidence is a sure sign that consumer spending is likely to grow very rapidly in the next quarter. 

The report, published by the Conference Board, also indicated that among those who were surveyed 12 percent planned to purchase a home in the next quarter and it also concluded that sales of both automobiles and appliances are likely to continue to increase in the coming months at rates as high as last year.

In addition, when the government puts up trillions of dollars in stimulus spending, as it did in 2020 and now in 2021, consumer confidence is bound to increase economic activity and that will spike the job market. 

Manufacturing

Manufacturing in March increased at the fastest pace in 38 years and expectations clearly point to a strong recovery in this sector. The Institute of Supply Management’s monthly manufacturing survey came in this week at 64.7 percent, and readings above 50 percent represent the percentage of companies reporting an expansion of production, rather than a contraction.

Manufacturing was in recession most of last year; however, the March numbers indicate a steady improvement throughout 2021. Economists believe the home goods industry, especially appliances and furniture, will continue to see supply chain issues, prices increases, and material availability through the first half of 2021.

Unemployment

March brought more good news with the latest job numbers: The U.S. economy brought back an astounding 916,000 jobs vs. expectations of 660,000. This level of growth is a predictor of even faster employment growth for the balance of 2021. The unemployment rate dropped from 6.2 percent to 6.0 percent in March, and it is entirely possible that the rate will fall below 5 percent by year’s end. There was also a large upward revision to the job numbers in January and February that added to the overall reduction we are experiencing in unemployment.

The employment report noted that in retail, jobs rose by 22,500 for the third month in a row, and it is a fact that appliances, furniture and electronics completely outperformed most other parts of the U.S. economy. Even though there are millions of back orders, supply chains seem irretrievably broken and our sales teams are still in their homes, the home goods business is as good as ever.

Bottom Line

I have to end this column with some facts about the impact of the coronavirus on the economy. As of April 6, 62.4 million Americans have been fully vaccinated for COVID-19. While this is good news, a majority of states opened up by removing restrictions on places like bars, restaurants and indoor gatherings, and over 23 states are seeing an increase in infections and cases of the virus. Its variants are spreading in every state in the union with Michigan being ground zero, and we are heading into the possibility of a fourth pandemic wave.

While vaccinations are going well, experts are not sure we can outrun COVID if we don’t get everyone onboard. The reopening at the state level is happening faster than nearly anyone thought possible a month ago and this could be our undoing. I am not making any predictions, just hoping that we can get this under control before the next wave puts us back to last year.

Joe Higgins is a 42-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant, public speaker, AVB keynoter and YourSource News contributor. Visit his website, Quest 4 Quality with Joe, at www.q4qwithjoe.com.