Last Week’s Economic News in Review-Oct 22 2020
Retail sales and consumer prices increased, as did layoffs.
Retail Sales
Retail sales saw big gains, with transactions hitting $549.3 billion in September, an increase of 1.9 percent over August, and up 5.4 percent over September 2019, the Census Bureau reported last week.
Retail categories that saw significant surges included clothing and clothing accessories stores, which shot up 11 percent; department stores, which increased 9.7 percent; sporting goods, hobby, musical instrument, and book stores, which grew 5.7 percent; and motor vehicle and parts dealers, which expanded 3.6 percent.
Economists discussed various reasons for September’s gains in spending despite continued high unemployment. Two key factors in that regard were back-to-school shopping and the last remaining portions of economic stimulus being spent. Regardless of the explanation, the uptick is not expected to continue.
“Although sales growth is strong, it will slow through the rest of this year and into next year,” PNC Financial Chief Economist Gus Faucher told the Reuters news service. “The slowing will be even larger if Congress does not pass another stimulus bill. Unemployment remains pervasive throughout the U.S. economy.”
Consumer Prices
Consumer prices continued rising with the Consumer Price Index for All Urban Consumers growing 0.2 percent in September after expanding 0.4 percent in August, according to last week’s report from the Bureau of Labor Statistics.
The index for all items except for the volatile food and energy categories – known as core inflation – rose just 0.2 percent in September.
Key drivers for September’s price gains included prices for used cars and trucks, which grew 6.7 percent, and gas utilities, which increased 4.2 percent. Notably, September saw the biggest spike in used vehicle prices in 51 years.
The upshot from September’s consumer price gains: This was the slowest monthly increase in four months. After consumer prices dropped in the initial aftermath of March and April COVID-19 shutdowns, they bounced back. Now we see a leveling off in inflation as the reality of high unemployment numbers is sinking in.
Initial Jobless Claims
Looking at employment news, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending October 10 rose to 898,000, which was 53,000 claims higher than the preceding week’s total of 845,000, the Employment and Training Administration reported last week.
The four-week moving average – regarded as a more reliable measure of jobless claims – rose to 866,250 claims, which was 8,000 claims higher than the previous week’s average of 858,250.
It’s important to keep in mind that layoff totals for a week in the range of 800,000 and higher, which has been happening for weeks on end, is extremely unusual. The nation is looking for a turnaround and not getting it.
“It’s discouraging,” Pantheon Macroeconomics Chief Economist Ian Shepherdson told the New York Times. “The labor market appears to be stalled, which underscores the need for new stimulus as quickly as possible.”
This week, we can expect:
- Tuesday – Housing starts for September from the Census Bureau and Department of Housing and Urban Development
- Thursday – Initial jobless claims for last week from the Employment and Training Administration; existing home sales for September from the National Association of Realtors; leading economic indicators for September from the Conferences Board.
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