Happy Inauguration Day!
The Biden-Harris administration begins its work today, and will be charged with managing several convergent crises in the United States: the COVID-19 virus, which has claimed the lives of over 400,000 Americans; the spread of misinformation posing as legitimate news; and a growing economic crisis fueled by high unemployment due to COVID-19.
Retail sales are the largest driver of the U.S. economy. Dips in consumer spending reflect erosion in consumer confidence, which can have a dampening effect on the actual economy.
The time for an economic course-correction is ripe. Retail sales dipped in the U.S. for the second consecutive month in December, the Commerce Department reported Friday. Americans spent $540.9 billion last month, a decrease of 0.7% compared to November 2020, as COVID-19 infections surged across the country and led to new waves of business closures and regional lockdowns.
For the second consecutive month, the drop in retail sales was worse than what economists were predicting. Economist Maria Solovieva of TD Economics wrote in a note to investors, “The last weeks of 2020 brought a resurgence of coronavirus cases and additional business restrictions, foretelling a soft December shopping period. Rising jobless claims and declining personal income did not help consumers to loosen their purse strings either.”
December was a precarious month for millions of Americans, as unemployment benefits timed out while Congress struggled to pass the second COVID-19 stimulus bill, the Coronavirus Response and Relief Supplemental Appropriations Act, which eventually put $600 into bank accounts and extended unemployment insurance programs through mid-March.
More help could be on the way. President Biden has introduced a $1.9 trillion stimulus plan to support Americans, a massive relief package that has the potential to turn consumer spending around. The proposed legislation will include economic impact payments of $1,400 for many Americans, a minimum wage hike to $15, and billions of dollars in rental assistance.
Should the legislation pass in its proposed state, it “should provide firm ground to households until the pandemic is finally over,” economist Solovieva predicted.
(Photo: Getty Images)
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