Food lines are getting longer while big-box retail sales zoom. In fact, big-box retailers and companies that are adept at online sales might ask themselves, what recession? Many are posting record sales amid the economic chaos. Similarly, the stock market is hitting new highs. At the other end of the economic spectrum, the lines at food banks are getting increasingly longer.
Target is the latest retailer to announce record quarterly sales. Its latest report indicates that the company has not only been able to attract shoppers back to make in-store purchases, but its online sales are also shattering records. Target’s comparable sales rose 24% in the 2nd quarter, which is the fastest pace in the company’s 58-year history, and three times the average rate of increase. The company credited government stimulus money put into shoppers’ pockets, the modifications it made to make the in-store shopping experience safer, and alterations to the product mix that is more attractive to shoppers and less expensive.
Stock market gains have dovetailed record sales of big-box retailers such as Target, Loews, Home Depot, Walmart, etc. This week the S&P set a record. The cause of this is the Federal Reserve’s policy of maintaining near-zero interest rates. This policy also juices market liquidity. Investors also believe a vaccine for the corona virus is forthcoming. They feel even more potent; the Trump Administration will rescue them first – no matter what happens in other parts of the economy. All of this is in stark contrast with developments in the real economy.
The latest Labor Dept. report indicates that over 16 million workers remain unemployed, which represents 10.2% of the workforce. While unemployment is down from March when it was 13.3%, it still matches the highest level achieved during the Great Recession. To ordinary workers, the current market is not a gravy train but a disaster. Congress’s failure to reach a compromise on a new fiscal stimulus program exacerbates their distress. The House of Representatives passed a rescue plan three months ago. However, the Senate has yet to propose its version, and worse still, the President falsely believes he can implement stimulus policy through executive action – nothing has happened!
Unless something changes, the picture for ordinary workers will become more catastrophic and big-box retailers can expect to see a slowdown in sales. The number of new weekly claims for unemployment compensation has leveled off at a very high level of about 1.2 million applications weekly – about five times the amount of weekly claims in a healthy market.
Workers are hurting! Not only has the additional $600 per week in unemployment compensation expired but so has protection against rental evictions and assistance to small businesses. Most importantly, state and local area governments have not received significant stimulus assistance from the federal government, which forces them to reduce their workforce and public service expenditures.
Racial disparities in labor market hardships remain. For example, 9.2% of whites are unemployed, but among Blacks, the unemployment rate is 14.6%. Among Asians and Latinos, the unemployment rates are 12.0% and 12.9%, respectively.
Good fortune at the top of the economy is not trickling down to ordinary households and workers. It is past time that Congress and the White House act more responsibly to avoid the lopsided impact that COVID is having on workers while well-healed stock market investors and big-box retailers enjoy a record ride.