Rocket Ship Recovery

On Friday, President Trump declared the U.S. economy is on a “rocket ship recovery,” implying the economy will snap right back after posting an impressive recovery in jobs on Friday. Consensus expectations were for the U.S. economy to shed another 7.5 million jobs but, astonishingly, the U.S. economy added 2.5 million jobs. [i]

When you reflect on what consumers said they looked forward to most when the economy reopened, dining out was their highest priority. (See our prior blog post: “Spring Has Always Followed Winter”)

Breaking down the May employment picture confirms what we believed would be the case―jobs in leisure and hospitality rebounded the most. [ii] [iii]

Auto sales came back strong in May as states began to reopen following weeks of COVID-19-induced lockdowns. Annualized seasonally adjusted units increased to 12.1 million, up from 9 million in April and the strongest report since February. [iv]

From a consumer perspective this may understate the gains, as fleet sales have reportedly collapsed with rental car companies canceling most of their orders and some―namely Hertz―in bankruptcy. [v] Hyundai reported its U.S. sales to fleets fell by 79% in May while retail sales grew by 5%. [vi]

Retail sales also saw an uptick in May, with anecdotal reports from some retailers generally positive. Costco reported a year-over-year same-store sales gain in May after posting a decline in April and estimates of weekly chain store sales from Johnson Redbook showed the low point in year-over-year sales declines in late April or early May. Sales declines remained severe in following weeks, but have moderated recently, suggesting a potential turn. [iv]

One note of caution amidst this positive economic news: In all likelihood, this economy might not recover like President Trump claimed. From the data being reported out of China, it looks like their economic recovery has plateaued at about 90%. [vii]

In our case, the jobs recovery in the hotel, entertainment & leisure, and sporting events industries might be longer-term laggards. [viii]

I am a believer that we could have a quick recovery but, going to the moon and making it back only 90% of the way is not making it back at all. Leaving Americans behind after the government-induced economic shutdown will have extremely toxic impacts on our culture. A “rocket ship recovery” only counts if it is a full recovery with all Americans returning to work. Our economy needs this, as do our citizens.

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Tim Phillips, CEO, Phillips & Company

Sources:
i.       https://www.briefing.com/calendars/economic/display-article?ArticleId=ER20200605083000NonfarmPayrolls&FileName=employ.htm
ii.      https://www.cnbc.com/2020/05/08/these-industries-suffered-the-biggest-job-losses-in-april-2020.html
iii.     https://www.cnbc.com/2020/06/05/record-job-gains-heres-where-the-jobs-are-in-one-chart-may-2020.html
iv.     https://www.economy.com/economicview/analysis/379960/US-Consumer-Spending-Has-Turned
v.      https://www.wsj.com/articles/hertz-preparing-bankruptcy-filing-as-soon-as-friday-night-sources-say-11590182538
vi.     https://www.reuters.com/article/usa-autos-rentals-idUKL1N2DE1IG
vii.    https://research.cicc.com/
viii.   https://www.nbcnews.com/politics/meet-the-press/10-1m-jobs-lost-leisure-hospitality-sector-decline-n1208836