A Happy Holiday For Retailers?

Scott Anderson
Chief Economist

A resurgence in coronavirus cases across nearly all states and the weaker-than-expected October retail sales report released earlier this week puts the strength of the upcoming holiday shopping season in doubt.

We thought as folks gear up for their first, and hopefully last, coronavirus Thanksgiving, now would be a good time to share our holiday retail sales outlook for 2020.

The number of new COVID-19 cases began to rise sharply in mid-October and has become truly exponential over the past week. A new record-high number of cases on a 7-day moving average basis has been reached 26 consecutive days since October 24. This has resulted in many states backtracking on their in-person restaurant and bar reopenings, instituting new curfews between 10PM and 5AM, and placing stricter capacity constraints on businesses that have been allowed to stay open. The list of states and metro areas that are going down this road continues to increase. At least 18 states are undertaking one or more of these reopening roll-back strategies by our count, including California New Mexico, Oregon, Michigan, Washington, Wisconsin, New York, and Illinois just to name a few. Consumer driven small businesses that have been holding on by their fingernails over the past eight months are about to get challenged again with worsening financials and less government support.

U.S. retail sales already increased at its slowest pace since April last month. The labor market recovery is fading, adding to the coronavirus headwinds for many consumer service businesses. Nonfarm payroll gains moderated to 638,000 in October, the smallest monthly gain since job growth returned in May.

We forecast about 100,000 fewer net jobs will be created in November.

Looks like a Modest Holiday Sales Season Ahead

We expect a pretty modest holiday sales season this year. It will likely be neither a boom nor a bust for retail sales. We are forecasting retail sales growth for November and December of 2.9% from a year ago, down from a 4.4% increase over the same period in 2019. Moreover a lackluster retail sales gain as low as 1.0% can’t be completely ruled out, depending on how bad the coronavirus restrictions get by the end of the year.

Moderating income growth will weigh on consumer demand even as the coronavirus shutdowns keep tens of millions of more people at home. Less holiday travel and mall shopping, fewer holiday office parties, and declining consumer confidence could rob many retailers and restaurants of much needed profits this holiday season. Retailers are trying to salvage what they can with early Black Friday sales and numerous on-line deals to get people spending sooner and longer this year than we have seen in the past. So far in November, retail sales appear to be off to a respectable start, but an early start to the holiday shopping season could also mean an early end to the shopping season in December.

To find out more, check out this week’s U.S. Outlook Report.

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Consumers Keep Spending Going Into The Holidays

Scott Anderson
Chief Economist

The September consumer spending and income report exceeded economists’ forecasts again.

In real terms, consumer spending increased at a robust 15.9% annualized pace in September, nearly ensuring consumers will continue to increase their spending at a healthy pace over the holidays too. Durable goods spending is up 14.3% from a year ago even as personal services spending has declined 6.5% from a year ago.

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California Economic Outlook – September 2020

Scott Anderson
Chief Economist

Economic growth has resumed and net job loss has ended in California after a sharp and unprecedented decline in March and April. But despite three consecutive months of solid increases in economic activity and jobs, the state has regained less than one-third (31.1%) of the over 2.6 million jobs lost in March and April.

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The Significant Other: Why Overlooking Women’s Economic Impact is Bad Business

Scott Anderson
Chief Economist

In August, the Business Roundtable said it was redefining the purpose of U.S. companies. The manifesto signed by 181 CEOs declared that corporations should do more than line shareholders’ pockets: they should also invest in their employees and protect the environment.
The statement was admirable and lofty, and as part of a company with best-in-class environmental policies, I was pleased with that news. That said, there’s a critical piece of sustainability missing from that charter.

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Risk & Reward: 5 California Industries Being Reshaped by Climate Change

Scott Anderson
Chief Economist

Californians are feeling the effects of climate change: wildfires, record heat waves, and even atmospheric rivers have begun to wreaked havoc on the Golden State.

It’s increasingly clear that certain sectors of the world’s fifth largest economy are emerging as ground zero for the costs of climate change – and the potential costs are staggering.

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