The sharp rise in COVID-19 cases has cut into consumer spending, real-time indicators suggest, raising the prospect of renewed layoffs and a setback to the economic recovery.
“The economy follows the virus,” said Curtis Dubay, a senior economist with the U.S. Chamber of Commerce.
The nation has gone from fewer than 50,000 new coronavirus cases each day in early October to more than 150,000 in early November, according to the COVID Tracking Project. As the number of cases has increased, commerce has taken a hit.
Credit and debit card use, which was above 2019 levels in mid-September, dropped below last year’s usage in early October, according to JP Morgan.
Card usage in early November was 7.4% below last year’s total as new COVID-19 cases exploded. Friday’s high-water mark of over 170,000 new cases came roughly a week after the nation surpassed 100,000 new daily cases for the first time, according to the COVID Tracking Project.
Restaurants have also taken a hit as infections rise, especially in cities where rates are skyrocketing. In Chicago, reservations were over 80% lower on Nov. 14 than they were for the same day in 2019, according to OpenTable. The virus has infected one in 18 Chicagoans, Mayor Lori Lightfoot announced Friday, and the city’s hospitals are at 100% capacity.
Dubay noted that the current spike in coronavirus infections has already hurt consumer sentiment, which dropped nearly 7% from October to early November, according to polling by the University of Michigan.
“That is a direct result of people being wary of going out and shopping,” he said.
Joel Griffith, a research fellow for financial regulations at the Heritage Foundation, a right-leaning think tank, warned that shutting down parts of the economy would only make recovery efforts harder.
“As you see the new wave of shutdowns expand, you will see a serious impact on the economy,” he said.
Griffith warned that economic growth could be negative for parts of the country that shut down their economies.
“You could very easily see a double-dip recession in select states,” he said.
Doug Holtz-Eakin, president of the center-right economic think tank American Action Forum and former director of the nonpartisan Congressional Budget Office, said that last spring, the virus weighed heavier on economic activity than the shutdowns because people chose to cut back on spending and going out before the restrictions were announced.
“There’s been some very careful research. Did the lockdowns cause the recession, or did the virus cause the recession? It was the virus,” he said, adding that “the lockdowns are something that elected officials did because there was a crisis out there and they had to do something, but people weren’t going out anyway.”
Mark Hamrick, senior economic analyst for Bankrate, said that people are more likely to cut back on economic activity because they are fearful of the virus than because of government shutdowns.
“It’s not a question of what governments do. It’s a question on what consumers do and whether they take it upon themselves to restrict their activity,” he said.
Still, lockdowns and restrictions are happening all over the country due to the increase in virus infections.
New Mexico Gov. Michelle Lujan Grisham and Oregon Gov. Kate Brown, both Democrats, issued two-week lockdown orders for their respective states on Friday. Virginia Gov. Ralph Northam, also a Democrat, tightened restrictions for public and private gatherings. Also, North Dakota Gov. Doug Burgum, a Republican, limited indoor dining in restaurants to 50% capacity. Philadelphia Mayor Jim Kenney on Monday announced that indoor dining will be prohibited at restaurants, gyms will be closed, and indoor gatherings at home will be restricted starting on Friday.
Jason Straczewski, vice president of government relations and political affairs at the National Retail Federation, argued against having additional lockdowns. He said that retailers learned from the shutdown last spring how to remain open while also keeping everyone safe.
“Tell us what the capacity limits are. Tell us what the rules of the road are. Retailers have made these investments to protect their workers and protect the public so people can shop safely,” he said.
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