U.S. Economy Gets Boost as Americans Spend More
25 November 2020 - 9:59PM
Dow Jones News
By Josh Mitchell
The U.S. economy is heading into the holidays continuing to
recover, in large part because Americans continue to boost their
spending, particularly on goods.
Many reports Wednesday will offer clues about the economy's path
this winter. These include Commerce Department data expected to
show that consumer spending rose in October for the sixth straight
month, while household income declined because of the fading
effects of government aid programs, according to economists
surveyed by The Wall Street Journal.
Consumer spending appears to have increased more slowly recently
after rebounding strongly this summer. But it has been good enough
to help fuel economic growth since the sharp recession this past
spring, when the coronavirus pandemic forced millions of
businesses, schools and government agencies across the U.S. to shut
down or limit their activities. Consumer spending represents more
than two-thirds of economic activity in the U.S.
The recent economic data have been mixed, showing signs of both
strength and weakness.
Job growth was robust in October, though it has slowed every
month since June. Unemployment fell a full percentage point to
6.9%, but remains high at nearly double the February 3.5% rate.
Retail sales rose in October, but at their slowest pace since
spring. Economic output rose at a record rate in the third quarter
but remains well below pre-pandemic levels. And the outlook is
cloudy.
A new wave of virus infections over the past month has led some
cities and states to impose new restrictions, such as evening
curfews, that could reduce households' ability to spend. Americans'
confidence in the economic outlook dimmed this month, the
Conference Board, a private research group, said this week. The
Jan. 1 expiration of expanded unemployment benefits will likely
lead to a drop in income for many jobless workers.
Still, Americans appear to be gradually increasing their
spending. While they aren't spending on airfares, hotel rooms or
concerts, they have increased spending on cars, appliances and
building materials for home projects. U.S. households overall have
paid down debt and boosted their savings, which could help enable
them to keep shopping in the near term.
"The economy is resilient," said Rubeela Farooqi, chief U.S.
economist at High Frequency Economics. "What we're looking at is
the split nature of the recession. People who recovered their jobs,
they're able to save and spend on goods. On the other hand, you
have a substantial number of people who are low-income people who
don't have jobs to go back to."
Economists project that aggregate household income fell last
month but remained above its level from March, just before the
pandemic.
The economy's path ahead depends partly on the fate of workers
like Ben Milano, a 59-year-old married father of twin girls in Long
Island, N.Y.
Mr. Milano lost his job at a travel company -- he had managed
and organized corporate travel events -- in March, as companies
canceled events world-wide. Then his wife, an ear doctor, was
furloughed. The couple cut spending broadly.
His wife was called back to work this summer and Mr. Milano
started receiving unemployment benefits. They resumed certain types
of spending. Mr. Milano recently had surgery on his back from an
injury incurred this summer, and the couple recently repaired a
broken pipe in their bathroom.
But they are looking to cut back again. In January, they will
have to resume payments on their mortgage as a reprieve granted by
their bank expires. In March, his jobless benefits expire.
"Do I go into my 401(k) and start pulling out of that?" he said.
"I'm not so worried for January. I'm worried about March, if this
continues the way it is."
Write to Josh Mitchell at joshua.mitchell@wsj.com
(END) Dow Jones Newswires
November 25, 2020 05:44 ET (10:44 GMT)
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