More job loss as retail and manufacturing suffer
Since mid-March, about 17 million people have lost their jobs due to the economic halt caused by the coronavirus. However, the Fed, which has already slashed its benchmark interest rate to zero and pumped trillions of dollars of liquidity into the financial system, stated that “the near-term outlook was for more job cuts in the coming months.”
According to the agency, the leisure and hospitality, along with retail -- barring essential services -- industries were badly affected by the various social distancing measures and stay-at-home orders implemented throughout the country.
In addition to this, most of the 12 Fed districts also reported declines in manufacturing. The only exception to this was with food and medical products, which reported strong demand, though these still faced obstacles in production and supply chains. (Related: Florida farmers left with mountains of unsold food as coronavirus scrambles supply chain.)
While the current dip already looks bad, some are warning that the worst is yet to come.
“Further big drops are likely in April, because lockdowns began to bite hard only in mid-March, so roughly half the month was largely unaffected by the virus crisis,” said Ian Shepherdson of Pantheon Macroeconomics.
Data from the Federal Reserve Bank of New York, the state hardest hit by the pandemic, showed that the manufacturing industry sank even further. The Empire State Manufacturing Survey fell by 57 points to -78.2, the lower level it’s ever recorded. During the Great Recession, the index only hit -34.3.
Eighty-five percent of manufacturing firms that were surveyed reported that business conditions had worsened, while only seven percent reported improvement. They also reported declines in employment, new orders, inventories and shipments.
“Severely depressed demand, supply disruptions and extremely high uncertainty will keep manufacturing on an extremely weak trajectory in the near term,” noted Oxford Economics.
While Oxford Economics predicts that New York manufacturing would recover in the third quarter, it warned that an extended lockdown could result in a “very slow and uneven recovery.”
Stockpiling hasn’t been enough to save retail
Across the nations, states have experienced runs on grocery stores as people stocked up in the face of the growing pandemic. According to the Commerce Department, however, this hasn’t been enough to save retail as sales dived down 8.7 percent from February.
Businesses focused on foodservice and drinking were predictably hard hit. Sales from these dived by 26.5 percent. Following close behind were motor vehicle sales, which fell by 25.6 percent. Travel restrictions combined with low oil prices have also pushed down sales at gas stations by 17.2 percent.
Food and beverage stores, however, surged as people stockpiled on supplies. These businesses reported an increase of 25.6 percent in sales. So too did health and personal care stores, which reported growth of 4.3 percent.
Online retail has also seen some growth as purchases increased by 3.1 percent as people have resorted to buying goods online in place of going out to stores -- something considered much riskier due to the pandemic.
The Fed’s industrial output survey displayed a similar trend. Non-durable goods -- a category which includes food, soap, toilet paper and clothing -- posted a decline like the rest of the index. However, this decline was much smaller, at only 3.2 percent.
Goods that consumers could stockpile to remain comfortable indoors such as food and beverage, tobacco products, chemicals and paper only decreased by two percent or less, the Fed report said.
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