Shopping for summer styles 

Retail sales came back bigly in May once shops around the country began reopening, increasing a record 17.7% for the month. Sales jumped (like Hulk style jumped) 188% at clothing stores, 90% at home-furnishing stores, 29% at bars and restaurants, and 44% for autos. 

Moral of the story: While retail sales far outpaced expectations in May, the number still came in 6% lower than last year. Plus, remember all those people who are getting paid more today on unemployment than they were while they wore working? I actually found the numbers behind this – 63% of US workers are earning more under unemployment. They had some extra cash to spend. Once those unemployment benefits run out and the pent-up demand goes away, hard to say how sustainable this retail sales growth will be. 

Manufacturing maybes

The Philly Fed’s Manufacturing Index, which is a mid-Atlantic regional index, showed improving conditions. The index increased to 27.5 in June from -43.1 in May (any number above 0 indicates improving conditions). There was a healthy increase in both new orders and shipments, and the business outlook over the next six months also increased meaningfully.

Moral of the story: As economies reopen, manufacturing has started to rebound quite nicely. A comparable survey from the New York Fed published last week showed similar optimism. Like retail sales, however, we’re still going to be running at lower manufacturing levels than the pre-COVID times as the industry deals with weaker demand, supply chain disruptions, and uncertainty on the overall economy. 

Where are the jobs? 

Last week 2.19 million new claims were filed for federal and state unemployment benefits. The continuing claims number, which peaked around 23m, is still sitting at 20.54m. If you include all state and federal assistance programs, continuing claims are actually 29.1m, which is down only slightly from the 29.5m last week. 

Moral of the story: Job losses haven’t slowed as much as we would have hoped and people haven’t returned to work nearly in line with all the economies that have started reopening. My worry is a second wave of layoffs coming as businesses start to reopen, rationalize the new normal, and those currently furloughed lose their jobs altogether. If we don’t see unemployment claims begin recovering at a much more reasonable pace, this recovery we’re seeing (retail sales, consumer spending, manufacturing, etc.) will be v short-lived because our economy starts and ends with the consumer. 

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