The Consumer Might Be Teetering

Redbook same store sales growth fell for the 2nd straight week in the week of September 12th. As you can see from the chart below, it fell from -0.1% to -1.2%. This might not be a blip lower. The good news is it’s occurring after the back to school shopping season. The $300 in weekly unemployment benefits could have boosted spending, but now that thesis is dubious. The details are convoluted. It probably won’t have a meaningfully positive impact on spending. The backup plan for the bulls should be to hope for better job creation catalyzed by the Abbott tests which should allow the leisure and hospitality industry to reopen fully.  

There are good and bad aspects to the benefits because each state is facing unique challenges. On the one hand, about 6% of unemployed people don’t qualify for the extra money. That’s because they don’t meet the $100 weekly threshold to get benefits. This doesn’t matter in 9 states where they pay a minimum benefit of $100. On the positive side, as of September 10th, 21 states were paying the $300 out. The best news is workers who haven’t been getting benefits but qualify for them, will get paid back up to $1,800 which is 6 weeks of benefits. Florida is an exception where only 4 weeks of benefits will be paid out.

The worst news is the money is already running out. Texas, Tennessee, Iowa, and Montana said after paying 6 weeks of benefits, they are stopping the program. It might be confusing for someone to get an $1,800 check and then nothing else. It wasn’t the best decision to use $44 billion in FEMA disaster relief money for unemployment benefits. This was bad timing as hurricane Laura, hurricane Sally, and the wildfires created a need for disaster relief (which is what the program is intended to do).

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