The Coronavirus Pandemic has led to sweeping job losses and the highest unemployment figure seen since the great depression. Although areas of the economy are starting to reopen, citizens are still concerned about their jobs and their ability to find new work in the worst-case scenario.

This has led to some huge changes in consumer spending, and the data is important for anyone invested in stocks, retirement funds, or any other investment product.

Saving Rate is Far Beyond Projections

Before the Coronavirus Pandemic, economists had predicted a 9% U.S. Household Saving Rate for 2020. However, the latest data shows that households are saving much more of their incomes.

In February, the rate was 8%. It then increased to 13.1% in March. Data for April is yet to be released, but analysts expect that it will climb again. Americans are starting to build cash reserves to prepare for the unexpected. Job losses, massive economic shutdowns, and the uncertainty surrounding the health crisis have all affected households.

Credit card spending has also dropped. Visa, one of the world’s largest credit card companies, revealed that payment volumes fell by 31% in April. Visa has seen a drop in all payment categories except drugstores, food-related businesses (including groceries), and major retailers Walmart, Target, and Costco.

The government is still in the process of distributing stimulus checks to Americans. This money is more likely to be saved or spent on essentials than it is to be injected back into the wider economy.

For consumers to start spending again, they will need to see new jobs in the market. According to the Federal Reserve, only 47% of Americans are confident that they could find employment within three months if they lost their jobs today. Households simply can’t afford to spend when they face layoffs or reduced working hours.

Why Does a Drop in Consumer Spending Matter?

The American economy is driven by consumer spending. In fact, purchases made by households represent more than two-thirds of GDP (Gross Domestic Product).

If consumers aren’t confident, it will take longer for the economy to recover. The government can see the numbers. Now is the time to start working on initiatives not only to reopen the states but also to support the struggling job market.