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The Economy is Rebounding Faster Than Many Expected: Here’s Why

Last Updated September 23, 2020 2:00 PM
W. E. Messamore
Last Updated September 23, 2020 2:00 PM
  • The economy is bouncing back aggressively after the COVID crash.
  • Jobs and retail sales are flying back on a trajectory to pre-crisis levels.
  • Meanwhile, the stock market has surged past pre-crisis levels, at least in tech stocks.

There are many signs of a V-shaped recovery for the economy. That’s a recovery where growth goes down, but then back up again at about the same rate.

The Wall Street Journal reported a range of private data Saturday, showing the economy is moving again. They pointed to department store sales measured by bank card transactions data :

Department store sales in the week ended June 10 were actually above year-earlier levels…

The economy contracted drastically this spring, but we could be back to where we were in January with plenty of the year left to spare.

Further, retail sales in other segments were also robust year over year:

Grocery, discount, variety and general-merchandise store sales all recorded sales above year-ago levels. Restaurants and hotels were still down from a year earlier but not by nearly as much as in April. Movie theaters, airlines and amusement parks are still deeply depressed.

Meanwhile, the stock market has melted up on a trajectory to its previous peak levels nearly as quickly as it crashed. It’s not an exact V-shape, but it’s shaping up to be much closer to a V-shape than an L-shape. Here’s why the economy is roaring back.

The American Economy Is Resilient and Industrious

Jobs and consumer spending picked up dramatically in May.

While the Bureau of Labor Statistics miscalculated the unemployment rate , new payrolls increased rapidly in May  as the economy moved back into action.

Americans aren’t going to let anything stop them from working and spending their money. And the economy is proving resourceful enough to quickly adapt to changing circumstances and continue to grow around obstacles, often with the help of digital technology.

Notwithstanding certain hard-hit industries, workers still have lots of work to do. They also still have bills to pay, so they’re motivated. They entered the crisis with a record amount of household and consumer debt.

But, the American consumer wasn’t in such bad shape that they couldn’t make it through the major disruptions this year. They had enough energy and spending power to drive up sales in May while starting new jobs in the millions.

Last year, a news story made the rounds about 40% of Americans being unable to handle a $400 emergency expense. It was false. Several politicians repeated it, including Democrats running for the presidential nomination. And the story ran on CNBC, CNN, CBS News, and Forbes. But the headlines severely distorted the actual findings of the survey .

Value of Tech to Recovery Key to Tech Stock Growth

nasdaq composite six month chart with dow jones industrial average and snp500 index source tradingview
The NASDAQ Composite (Blue) is up 9% over the last six months, while the S&P 500 Index (Orange) is down 5%, and the Dow Jones Industrial Average (Red) is down 10%. | Source: TradingView

As the wheels of economy picked up pace in May, the stock market rallied exuberantly. Tech stocks led to the equities melt-up. The NASDAQ Composite soared to the 10,000 level for the first time on Jun 10th. That’s a clue about what caused the speedy recovery.

Technology businesses have built an alternative commercial infrastructure to the existing one, finely-tuned it, and connected it at scale. That infrastructure has its limits, but also enormous advantages and efficiencies that have produced several multi-billion dollar companies.

That partially shows how much of the economy is digital, with production, marketing, and distribution going through or easily routable through online marketplaces less affected by a pandemic.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.