ACEC Macro-Economic Update: Fed Chair Urges More Stimulus | Retail Sales Plummet

ACEC News / Industry Statistics

May 18, 2020

ACEC Macro-Economic Update: Fed Chair Urges More Stimulus | Retail Sales Plummet

By Erin McLaughlin

Powell Urges Further Stimulus

Federal Reserve Chairman Jerome Powell is front-and-center in the media and policy circles over the past week—unusual for a fed chair normally—urging the White House and Congress to dedicate more money to stabilize and stimulate the economy, and ensure the response efforts so far are not wasted.

On a webcast hosted by the Peterson Institute for International Economic Wednesday, May 13th Powell commented that “There is a growing sense that the recovery may come more slowly than we would like… and that may mean that it’s necessary for us to do more.” Powell emphasized the severity of the COVID-19 economic impact, “The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II.”

Powell described that significant business bankruptcies and prolonged unemployment were likely if further funding is not allocated, and commented that the cost of more stimulus is outweighed by the risk to long-term damage, and the increased chance of a long recovery.

Mr. Powell also discussed how the recession had so far been hardest on those least able to weather it, which is detailed in the Federal Reserve Board’s Report on the Economic Well-Being of U.S. Households, Featuring Supplemental Data from April 2020, released Thursday, May 14th. The Federal Reserve details that among people who were working in February, nearly 40% of those in households making less than $40,000 a year had lost at least one job in March, compared to 19% of households earning between $40,000 and $100,000 a year, and 13% of households earning more than $100,000.

 

Retail Sales Plummet, Established Stores Enter Bankruptcy

Retail sales fell in April by a seasonally adjusted 16.4% from a month earlier, which is the biggest drop since record-keeping began in the early 1990s, the U.S. Department of Commerce Department reported on Friday, May 15th.

Most analysists expect April to be the worst of the upcoming months for retail, as businesses have begun gradually reopening this month. The social distancing, and required closures and travel restrictions, which largely began in mid-March, have been particularly hard on retail stores and restaurants. Even grocery stores sales—considered the place where people are still spending money—were down 13.2 %, according to the report.

Retail has been increasingly critical to the U.S. economy in recent decades, and consumer spending now accounts for more than two-thirds of economic output. The COVID-19 recession has been seen as a “nail in the coffin” for many struggling retailers who were already battling changing tastes and trends toward e-commerce. Several well-established retailers have filed for bankruptcy since the downturn, including J.C. Penney Co., Neiman Marcus Group Inc., and J.Crew Group Inc.

Erin McLaughlin is ACEC Vice President Private Market Resources.

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