Is the U.S. Economy Booming or Headed for Another Rough Patch?

Is the U.S. Economy Booming or Headed for Another Rough Patch?

Total retail sales were flat last month after experiencing a jump in March, the Commerce Department reported last week, as shoppers continued spending their latest round of government-stimulus money. Where are things headed for the long term? 

Total retail sales were flat last month after experiencing a jump in March, the Commerce Department reported last week, as shoppers continued spending their latest round of government-stimulus money.

Sales held at the same pace set by March’s revised 10.7 percent, which was largely fueled by increases in people getting vaccinated, as Americans felt more comfortable spending time outside of their homes, eating at restaurants and visiting stores and sporting goods.

“Flat sales going from March to April is still pretty strong. The level of sales is much higher than before the pandemic,” Scott Brown, chief economist at Raymond James Financial, told The Wall Street Journal. “It’s still a sign that consumer spending is pretty healthy at this point.”

Motor vehicle and parts sales were up 2.9 percent and 3 percent at restaurants and bars, a smooth increase after the industry was hit hard during the pandemic, as social distancing measures forced millions of eateries to permanently shutter.

The positive economic signs were set back with reduced spending in several sectors, such as clothing and accessories, furniture and home improvement, gardening, sporting goods and general merchandise stores.

Economists noted that the “bumpiness of the economic recovery” reveals how closely connected consumer spending is with the stimulus money from the most recent relief package. 

“Stimulus money is driving retail sales right now,” Robert Frick, a corporate economist at the Navy Federal Credit Union, told The New York Times. “The economy hasn’t recovered completely even though we had a strong first quarter.”

A lower-than-expected April jobs report showed that the unemployment rate rose to 6.1 percent compared to a month earlier, revealing that millions of Americans still remain out of work, despite high consumer spending. That means jobless workers are turning to their unemployment insurance or stimulus money for spending purposes, but eventually, those additional federal funds will dry up. 

But it’s important to note that the U.S. economy is in a much stronger position compared to a year earlier. Spending at clothing and accessories stores climbed 726.8 percent in April from a year earlier, while furniture and home improvement increased almost 200 percent and sporting goods sales rose 155 percent from the same time period.

The department’s report comes after the federal government approved of $1,400 stimulus payments in March to carve a path toward economic recovery and provide struggling American households with a stronger financial ledge. 

Eligible recipients for the full direct payment included single filers earning up to $75,000, and joint filers making up to $150,000. Individual filers earning up to $80,000 and joint filers making up to $160,000 received smaller amounts. Eligibility is based on the most recent tax return and adjusted gross income.

Rachel Bucchino is a reporter at the National Interest. Her work has appeared in The Washington Post, U.S. News & World Report and The Hill.