Written by: Steig Seaward
Steig Seaward is the national director of research for Colliers in the U.S. and oversees the national research team and provides strategic leadership to all local offices. Based in Denver, Colorado, Steig brings more than 25+ years of commercial real estate experience, with extensive expertise in research, training and product development. Check out his post on Colliers Knowledge Leader here.
As we approach the World Health Organization’s first anniversary declaring COVID-19 as a global pandemic, we’re beginning to see signs of light at the end of this long and winding tunnel. Since spiking at nearly 250,000 cases on a seven-day moving average in the middle of January, the number of new cases has plummeted to less than 60,000 cases per day. The dramatic decline is due primarily to people recommitting themselves to social distancing protocols post-holiday and the rapid uptick in vaccinations over the past month.
As a result, states and local municipalities have begun easing restrictions. Consumer optimism is continuing to rise when coupled with the $600 stimulus checks approved last December and the anticipated next round.
Restaurants are returning to normal as restrictions ease and jobs follow. February’s impressive employment report indicated that 379,000 new jobs were added, led by 355,000 jobs in the leisure and hospitality sector (286,000 at restaurants and bars alone). Smaller gains were also posted in temporary help services, health care and social assistance, retail trade and manufacturing. Employment declined in state and local government education, construction and mining.
However, while the overall unemployment rate dipped 10 basis points to 6.2%, initial jobless claims remain elevated. Initial claims have yet to drop below 1 million a week since last May, indicating that the economy is still looking for traction.
Consumer spending will drive recovery. The powerful trifecta of additional fiscal stimulus, improving health conditions and accelerated vaccinations will lead to an economic growth period unlike any other.
Retail sales jumped 5.3% in January, as all major categories of spending increased. The biggest winners were Department stores (up 23.5%), home furnishings (14.7%), electronics (12.0%), e-commerce (11.0%), sporting goods and hobbies (8.0%) and restaurants (6.9%.) While winter storms will likely impact February retail sales in Texas and other northeastern states, sales will remain strong in the future.
The value of personal savings in the U.S. now exceeds $2.3 trillion and will rise further once the additional $1,400 fiscal stimulus checks are delivered to consumer mailboxes. Add in a favorable debt environment where consumers are sitting at the lowest debt service ratio in over 40 years, a year’s worth of pent-up frustration over not being able to spend freely and rising consumer confidence in their ability to stay safe while dining and shopping and you have the ingredients for an unprecedented period of retail growth.
Oxford Economics predicts the $1.9 trillion American Rescue Plan will lead to real consumer spending growth of 7.6% in 2021 and boost real GDP growth by 3.3 percentage points by Q4 2021 and a support growth of 7% in 2021 and 3% in 2022.
Vaccinations and new infection mitigation will be crucial to recovery. In February, vaccinations were averaging 1.5 million doses per day; however, that number increased to 2.3 million doses per day during the first week of March. At that pace and with the recent approval of Johnson & Johnson’s single-shot vaccine, everyone over 18 should have the ability to receive at least their first dose by early summer.
February’s strong employment figures are a harbinger of the road ahead. While sunnier days are visible in the extended forecast, we still need to contend with the storm clouds of today. As new, more contagious variants continue to spread, patience, restraint and diligence will need to be the prescriptive path forward until herd immunity can be established.