An historic plunge in consumer spending and polls showing employees fear the novel coronavirus demonstrate the need for continued caution as businesses and other venues reopen.
Some economists were stunned by April's 16.4% drop in consumer spending, which followed an 8% drop in March. They had projected a 12% dip in consumer spending.
An economist for Navy Federal Credit Union told The Washington Post the concern isn't how much consumer spending dropped. The takeaway is the significant underestimation of the numbers "shows we still don't have a handle on the depth of the recession and how Americans are reacting to the pandemic" and staying safer at home.
More than 20 million Americans lost jobs in April, sending the unemployment rate to its highest level since the Great Depression. The economy continues to shed jobs, and in many instances incompetent bureaucracies and investigations of alleged fraud continue to delay the delivery of unemployment compensation for displaced workers.
There is little doubt that uncertainty about their financial futures could make consumers more hesitant about spending what money they have. News about some well-situated companies taking advantage of increased federal spending for programs intended to protect paychecks for workers while others that seem more deserving go without inject doubt about the government's response.
Consumers must have faith in their financial futures and trust in the government before they will be willing to spend money. Considering that consumer spending drives about 70% of the U.S. economy, it's important for leaders to focus some of their pandemic response efforts on trying to improve both.
That will be accomplished only through transparency and honesty. Using the COVID-19 pandemic -- or overly optimistic outlooks -- as cover while legislative and executive branch officials push partisan or divisive agendas undermines both goals.
Failing to address consumers' fears and anxiety about the novel coronavirus, their safety and financial security, will erode the opportunities required to spur a sound economic recovery.