Read our July 24th report, The Coronavirus Recession

Consumer sentiment sank further in late July due to the continued resurgence of the coronavirus. In the last four months, the Sentiment Index has remained trendless, averaging 73.7, a decline of 25% from the same period in 2019. The Expectations Index fell back to 65.9 in July, tied with the six-year low recorded in May, providing no indication that consumers expect the recession to end anytime soon. While the 3rd quarter GDP is likely to improve over the record setting 2nd quarter plunge, it is unlikely that consumers will conclude that the recession is anywhere near over. The federal relief programs have prevented more substantial declines in consumer finances, partially shielding consumers from the unprecedented surge in job losses, reduced work hours, and salary cuts (see the chart). The lapse of the special jobless benefits will directly hurt the most vulnerable and spread even further by missed rent, mortgage, and other debt payments. Easing off the added jobless benefit will naturally result with job growth as well as provide for a delayed and gradual reduction in added benefits so that its eventual absence is much less disruptive.