Economic Perspective: Recovery In Goods Versus Services

MARY WALDEN:

“Today’s program looks at the recovery in goods versus services. Mike, the coronavirus induced recession is like no other the recession the country has experienced in so many ways. We saw this difference in how the recession began. Are we also seeing it in the recovery?”

MIKE WALDEN:

“We really are. Typically, recessions hit goods or products the worst. People, for example, don’t buy furniture. They don’t buy vehicles. They don’t buy homes because they’re trying to conserve their money. They don’t put money into big ticket items. In contrast, they usually continue spending on services.”

“This recession has been the exact opposite. The services sector has been hit much harder than the products or goods sector. Things like personal services, retail trade, et cetera have really been clobbered during this recession. And we’ve seen the same change during the recovery.”

“Typically we do see a recovery in durable spending on things like furniture, and autos, and houses, et cetera, but not like this. We are seeing a surge right now in spending on durable hard goods. In fact, spending on durable goods is only one percent under its pre-recession level, and I think a big reason for this is people are staying at home. They’re not going out and having their hair cut, they’re nails done, et cetera like they had prior to the recession. Instead, they’re staying at home, they’re looking at their homes. They’re looking for ways to improve their homes thinking, ‘Gee, I might have to work here. I might have to educate my children here.’”

“So I think that’s been a big difference, and once again this recession is like none we have ever seen before.”