Savannah Chamber

11 5 fundamental concern for consumer spending going forward as growth in household wealth has been on the increase since 2009, exceeding income growth in most years. Turmoil in stock markets could reduce financial equity wealth. As noted above, home prices should continue to increase, albeit at a slower pace than in recent years. That is important to the outlook because real estate wealth tends to have a larger influence on overall consumer spending than equity- based wealth. Changes in equity-based wealth have a significant influence on spending for luxury items and on spending by retirees – or near retirees, however. On an annual average basis, consumers' outlays will increase much faster (4 percent) in 2021 than in 2020 (-4 percent). Traditional lenders will loosen credit to customers with good credit scores. Non-traditional lenders will loosen credit to customers with poor credit scores. Vehicle sales will rise by at least 15 percent. Sales of light trucks will be very strong. The expectation for higher vehicle sales mostly reflects fundamental economic improvements that generate new demand and release pent-up demand (e.g., deferred replacement needs) for new vehicles. There are some additional factors that will boost vehicle sales, however. In post-pandemic America, people will be less inclined to use public transportation or ride share and more inclined to use personal owned vehicles. Similarly, personal vehicle sales should benefit from peoples' greater interest in traveling by car to destinations closer to home rather than to far- flung destinations by plane or cruise ship. In addition, stronger preferences for detached homes in the suburbs over attached housing in, or near, city centers should boost demand for new vehicles. This sanguine outlook for vehicle sales assumes that supply chain issue are largely resolved. Spending for durable goods and services will increase faster than spending for nondurable goods. For example, strong housing markets will support sales of durable household equipment and furniture and other home-related goods and services. As discussed above, vehicle sales will increase substantially. Price increases and demographic factors will cause spending on pharmaceuticals and other medical products to rise. Spending on grocery items will rise moderately from already elevated levels, but once a vaccine is available restaurants will begin to take market share back from grocers. One result will be more intense competition among retailers which will lead to margin compression. Spending on clothing and footwear will increase slowly. Among services, providers of health care will see above average growth in spending. In second half of 2021, the widespread availability of a vaccine will boost sales for many of the high- contact service businesses that can't fully return to normal as long as the pandemic rages. Although full economic recovery for many types of service businesses will take a long time, the year-over-year percentage gains will be very strong. Consumers' spending on luxury goods should expand in line with the overall economy, but such spending will be very sensitive to the performance of the US stock market. At the time of this writing, the US stock market appears to be vulnerable to setbacks. Labor Markets In 2021, the US labor market will continue to recover, but slowly until after a vaccine is widely available. On an annual average basis, total nonfarm employment will increase by 0.9 percent in 2021, which will not go far in terms of offsetting the massive job losses that occurred in 2020. Once a vaccine is available, job growth will accelerate sharply and become much more broadly based across industries. At that time, many businesses will find that they are significantly understaffed, and will boost hiring. Some industries that suffered the greatest job losses during 2020 will post the largest percentage gains in 2021. The leisure and hospitality is a good example. The "other services" industry, which includes many high-contact services, will also see fast job growth. Professional and business services firms will see the third fastest rate of job growth. The information industry will add jobs due to the rapid digitization of the economy and the roll out of 5G networks. Transportation and utilities will see limited or no job growth. Manufacturing, retailing, construction, and government formation are the major sectors expected to shed jobs. Industrial production will increase by about 5 percent due to firming orders and lean inventories, but production probably will not increase fast enough to offset jobs lost to automation and other gains in labor productivity. Manufacturing will struggle due to trade tensions, supply chain disruptions, past appreciation of the dollar, and slow global growth. Despite trade tensions, reshoring production will not be a major factor in 2021, with the possible exception of pharmaceuticals and other medical goods. Retail sales will increase, but retail jobs will continue to be lost as market shares shift to less labor-intensive channels. Homebuilders will be hiring, but job losses in nonresidential construction will offset job gains in residential construction. State and local government employment will decline due to disappointing revenue collections, with state government posting the largest percentage declines. Natural resources and mining also will see job losses, but these industries do not employ many workers.

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