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And the Question Is...

September 25, 2020

Through a recent Twitter poll, we discovered many of our clients are concerned about consumer demand. Whether you're in B2B or B2C, there are positive signs ahead - catch our newest TrendsTalk episode with ITR President and Speaker Alan Beaulieu to learn more.



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The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.

Hi everyone, I'm Alan Beaulieu from ITR Economics and I'm certainly glad to be able to talk to you today. I want to talk to about a particular question that came in. Our marketing department puts out surveys regularly and this week's, month's, I'm not sure often they do it actually, survey said that the most important question on people's mind is what about consumer or customer demand? I thought, well, that's a really good question, so let's address that, okay?

It all begins in many respects with the consumer so let's talk about the consumer. The consumer is the person that lives next to you. You're the consumer, I'm the consumer so we need to look at consumer health. Let's begin with how much money do we have? Well, disposable personal income is the measure for that. And if you've seen an ITR presentation by one of our many speakers, you know that DPI, disposable personal income, got quite a shot in the arm in April with all the stimulus checks that went out and there's still more money than normal in disposable personal income. It's a little over $16 trillion, which is certainly very healthy. It's down a little bit from the April record high, but the jump from March to April was beyond the pale of imagination so there's nothing strange going on. The point thing there's cash out there.

Then we always look at jobs, how are jobs doing in the private sector? Well, jobs are going up. The 112 rate of change is moving up, the monthly data trend is going up and we've seen 11.554 million jobs come backs since the April layoffs. I mean, it's been rather fantastic, don't you think? That still leaves us 10.31 million short of the record high we had in November, 2019, emphasis on it was in November. This wasn't the February fall off caused by COVID, things were slowing down in the US economy anyways. So we're still shy of that record high, but we're more than halfway back. That's pretty good news and we're going to continue to see that go back up. So that speaks to me of good news for consumer demand.

Then I looked at wages. Now, wage growth is not as strong as it was right after COVID, which means not as strong as it was in May; it's at 3.5%. It was a little higher in May, trying to get people back to work. But 3.5% compares very well for the last decade, which saw the average of 3.64%. For 2019, the average was 3.67%. For 2018, the average was 3.38%. So we're above '18, we're just a little shy of '19, wages are going up. That means consumers can get a job real soon. Those that don't have pretty good unemployment insurance coming their way. And there's wages increases to be had well above the rate of inflation. So we find that people will be able to spend. So consumer demand is going to continue on and that's going to feed in the demand for all sorts of things.

Retail sales are doing well, restaurants are doing well. When we look at wholesale clubs, they're doing well, they had a pretty mild second quarter but they're showing some nice rise here in July. Overall retail sales on a weekly index are doing well, fine. Even department stores are coming up off trough. So if you worried about consumer demand, I've tried to show you that there're some reasons to be encouraged.

What could squash it? The government of the various states shutting down the economy again. The likelihood of that right now? Pretty low, pretty low indeed. It's very hard to predict a flu season and nobody outside the media seems to be predicting, I shouldn't say nobody, very few people seem to be predicting a bad flu season. As a matter of fact, you would expect the opposite with people wearing masks, washing their hands and social distancing. It's a lot harder to pass the flu that way too. And The New York Times just had a headline that says, "Fall surge in cases." Well, I look at the cases, we look at the cases every day. Texas is seeing an increase, but the other two largest states are not. And as a nation, three-day averages, we're looking pretty good. I don't think I would rush to judgment about that.

So I'm feeling pretty good we're not going to see a shutdown, at least I am right now. And I see the consumer coming back, B2B is coming back. If your question is, what about my customer demand? Plan on more. Now that will vary depending upon what industry you're in of course, it always does. So do the rate of change analysis for your industry, do your own rate of change analysis. If you go to our website, you get help with that. I hope you have a great day. Thank you for letting me be a part of yours. Take care.


Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.