WASHINGTON — LaTonya Story is every retailer’s worst fear.
With the viral pandemic re-surging through the country and the economy under threat, Story has decided to slash her holiday shopping budget. She’ll spend less than $2,000 this season, down from several thousand dollars in 2019. Worried about entering stores, she’s buying gifts online and going out only for groceries.
“I want to be conservative,” said Story, a 47-year-old Atlanta resident. “I’m not a scientist, but the best precaution is to stay in place.”
The acceleration of coronavirus cases is causing an existential crisis for America’s retailers and spooking their customers just as the critically important holiday shopping season nears. It’s also raising the risk that the economy could slide into a “double-dip” recession this winter as states and cities re-impose restrictions on businesses and consumers stay at home to avoid contracting the disease.
An anxious consumer is a frightening prospect for retailers as well as for the overall economy. Any sustained recovery from the pandemic recession hinges on consumers, whose spending fuels about 70% of economic growth.
So as the virus rampages across the nation and with holiday sales expected to be weak and heavily dependent on online shopping, retailers are considering extraordinary steps to draw customers.
Some, like Giftery, a small shop in Nashville, Tennessee, are adopting their own safety restrictions. To reduce respiratory particles that could spread the virus, Giftery is asking shoppers to refrain from talking on cellphones.
“It is vital for us to stay open,” said William Smithson, the owner of Giftery, which generates about 35% of its annual sales from the holiday season.
At the same time, some high-end retailers are giving customers extra coddling. Neiman Marcus is letting shoppers book appointments to take virtual tours of its holiday trees and other decorations if they’re too fearful to enter a store. In doing so, the retailer hopes its customers will also get into the spirit of buying gifts.
“Business restrictions are increasing, and there will be some economic fallout from that,” said Jim O’Sullivan, an economist at TD Securities. But “even without authorities announcing new restrictions, individuals are likely to pull back from activity on their own.”
O’Sullivan predicts that the economy won’t grow at all in the final three months of the year — down from his earlier forecast of a 3% annual growth rate in that quarter — and will shrink 2% in the first three months of 2021. He, like most economists, expects a rebound starting in the second quarter once a vaccine is widely distributed.
O’Sullivan’s forecasts assume that Congress will agree on roughly $1 trillion in new stimulus for the economy by early 2021. Yet so far, there’s no sign of progress toward an agreement. More than 9 million people will lose their unemployment aid at year’s end, when two jobless aid programs are set to expire, unless Congress extends them. Consumer spending will likely fall further.
New viral cases doubled in just three weeks, O’Sullivan noted, after the previous doubling had taken six weeks. And as a consequence, many states are adopting or considering new restrictions on businesses. Maryland has limited stores and restaurants to 50% capacity. Retailers in most of California are now capped at just 25%; gyms, restaurants and movie theatres are closed to indoor customers. Illinois and Washington have limited stores to 25% capacity.
Sales at restaurants and bars fell in October for the first time in six months. Restaurant traffic declined further in November, according to the reservations provider OpenTable. Hotel occupancy is down from a month ago. Consumer spending on credit cards dropped in the first week of November from a month earlier, according to data compiled by Opportunity Insights.
After the deep recession that erupted in early spring, the economy did rebound faster over the summer and fall than most economists had expected. And some industries are still faring well. Home sales rose to a 14-year high last month. Manufacturing output, too, is still growing, though it remains below pre-pandemic levels.
But those positive signs reflect an unequal recovery. While lower-paid employees in face-to-face industries have lost jobs or fear losing them, higher-paid Americans have mainly been able to keep working from home. These consumers have shifted much of their spending away from services, like eating out, going to movies and hitting the gym, to buying goods — from computers and home and garden supplies to appliances and fitness equipment.
Yet many of those purchases have occurred online, with e-commerce sales having jumped 29% in the past year. By contrast, sales at physical retail stores, excluding autos, are essentially flat over the past 12 months.
As Story, the Atlanta consumer, and other Americans cut back and as colder weather ends outdoor dining in much of the country, consumer spending will likely weaken and hiring slow. Layoffs could rise. The number of people seeking unemployment benefits rose last week to 742,000 — a historically high number and the first increase since early October.
Small businesses are particularly worried about being forced to shut down again.
“If we close, it will be a devastation,” said Paulette Garafalo, CEO of Paul Stuart, a high-end clothing retailer that operates five stores in Chicago, New York and Washington, D.C.
The stores previously closed for four months while the company pivoted to online sales. But that shift generated only about 25% of pre-COVID business. Sales have since improved. But Garafalo doesn’t envision a boost from the holiday season. She just hopes sales won’t fall.
Out of a sense of urgency, Garafalo’s stores have called in their most seasoned sales people to alert customers to new merchandise and aggressively marketing a gift guide.
Likewise, Elonka Perez, who co-owns two restaurants in Washington state, says she’s “scared out of my mind” after Gov. Jay Inslee banned indoor dining again. Perez doesn’t know if her Taco Street restaurant in Seattle will earn enough money from takeout to survive colder weather.
“Winter is typically the slowest time for restaurants,” Perez says.
Taco Street was open for indoor dining for only a few weeks before having to shut down again. Perez and her husband have been pouring their savings into the business. They don’t know how long that can continue.
Macy’s, long an iconic symbol of the holiday shopping season, had to temporarily close its store in El Paso, Texas, because of a viral surge there. The chain is studying how the surge in viral cases is affecting the willingness of shoppers to enter its stores. In the meantime, Macy’s has sped up its checkout service for curbside delivery.
Other chains, particularly Target and Walmart, have benefited from changing habits. Customers are increasingly spending more when they visit the two chains, because they can combine shopping trips and buy food, clothes and other household goods — all at one location. That additional spending has come at the expense of small and independent stores.
For many consumers, the pandemic has transformed what shopping means. Alyse November, a licensed social worker in Boca Raton, Florida, says her clients have become increasingly stressed about shopping.
“Shopping was an outlet to relieve stress — it was an escape from life,” November said. “Now, it’s a source of stress because the process of it is so cumbersome. … We don’t know how to do it and do it safely.”
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D’Innocenzio reported from New York. AP Business Writer Joyce M. Rosenberg also contributed from New York.
to this report.
Christopher Rugaber And Anne D’Innocenzio, The Associated Press
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
