JUNE 1, 2020 – CONSUMER SPENDING SHARPLY DOWN; NEW UNEMPLOYMENT CLAIMS EASE
US consumer spending fell by a record 13.6 percent in April. This is the steepest decline since 1959. Economists believe this is likely to be the bottom, but also means the economy is in for a slow recovery. Even though some businesses have been reopening during the month of May, there are people in industries such as tourism and retail that will not recover quickly. They will be cautious with their spending going forward, delaying purchases, deferring big ticket items. Spending on discretionary items such as fashion, footwear and beauty are down over 50% from the same time last year.
The number of workers receiving unemployment benefits fell for the first time since February and new weekly claims eased, which seems to indicate layoffs related to the virus are slowing. Initial claims for unemployment benefits fell to 2.1 million from 2.4 million the previous week. 21.1 million people received jobless benefits during the week of May 16, down 3.9 million from the prior week. But the figures are still way above the previous record of 6.5 million seen in 2009.
However, layoffs are far from over with Boeing saying it will cut 13,000 and American Airlines are letting 5,000 workers go. Many economists think it will take months, if not years, to replace all the jobs lost this spring.
GDP fell at a 5% annual rate in the first quarter.