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Scar on spending habits from pandemic will last for years, says Barclays

Mohit Oberoi
Author: Mohit Oberoi

Last Updated: May 19, 2020

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.”

Note: If you’re interested in raising finance to see you through this tough period, see our list of recommended loan providers. There is also a list of loan providers for people with bad credit.

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Mohit Oberoi

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.