More Retail Pain Before Real Gains

The coronavirus still controls the economy. As COVID-19 cases began surging again in mid-September, the recovery inevitably began to slow. I made two main economic predictions this fall. First, that labor market conditions would deteriorate, with actual job losses likely. Second, that holiday retail sales would be underwhelming, particularly in malls and community shopping centers. The two are related, and both came to pass. Even with unprecedented financial support from the Federal government – actually raising personal income during a recession – retail sales were destined to decline if consumers could not count on their next paycheck.

The key findings:

• In-store holiday sales were the weakest in over a decade as consumers avoided physical stores and services, compounding retailers’ financial woes.
• The latest COVID relief bill and the likely next round of funding from the Biden Administration will help cushion the retail distress, but many more store closures and retailer bankruptcies.
• Pent-up retail demand—when finally realized—will provide a welcome boost for the sector but will recoup only a small share of the sales foregone in 2020, particularly for service-based retailers.
• Today’s vacancies will present tomorrow’s opportunities for enterprising retailers and strong landlords. But rebuilding will take time.

You can read the full article on Seeking Alpha.