Barclays expects America’s high unemployment rate caused by the coronavirus pandemic to weigh on consumer spending for years.
US retail sales plummeted by 16.4% from the prior month in April, the largest decline since this data series began in 1992, according to data from the Census Bureau last week.
Retail spending – along with employment – is seen as a barometer of America’s economic health. Over the last two months, more than 36 million Americans have lost their jobs since the health crisis shut down large sections of the US economy.
“Whether this is a permanent shift will in part depend on just how different the world looks when we emerge from economic lockdowns and whether or not we’re ultimately able to get a vaccine,” Barclays’ head of US economics research Michael Gapen (pictured) told CNBC’s Trading Nation last week.
Gapen sees a shift in consumer behavior due to the pandemic. He added: “Consumers have cut back on a wide variety of non-essential spending . . . They’re really funneling all their purchases into necessary consumer staples.”
US unemployment rate climbed to 14.7% in April, compared to 3.6% in January.
According to Gapen, in his best-case scenario, US unemployment rate would fall to 10.5% by the end of this year if we don’t find a vaccine for the virus. He added, “It could take three years at a minimum to kind of pull all of this unemployment back. Households will remain cautious.”