Signs of an economic boom are emerging as Americans open up their wallets to spend freely.
Retail sales soared 9.8% in March, according to a report Thursday from the Commerce Department. The increase follows a 2.7% slump in February, which analysts blamed partly on severe winter weather.
The surge is being fueled by shoppers flush with cash from $1,400 dollar relief payments, and in some cases, by the feeling of newfound security from a fresh vaccine.
The solid sales numbers helped push the stock market to new, record highs. The Dow Jones Industrial rose 305 points or 0.9% Thursday, while the S&P 500 index rose 1.1%.
Hope about the economy was further reinforced after data showed the number of Americans filing new state unemployment claims last week dropped to 576,000, a decrease of 193,000 from the previous week.
That was the lowest since the week ended March 14, 2020, when the pandemic starting gripping the United States.
"At long last the economic recovery appears to be picking up speed," said Mark Hamrick, senior economic analyst at Bankrate, discussing the weekly claims report.
"Some employers are responding by boosting wages and even throwing in hiring bonuses. The job market should only tighten further in the months ahead, raising the prospect of further pay gains, particularly for entry level positions."
Claims for unemployment benefits under a federal program for gig workers and the self-employed also dropped last week to 132,000. As of March 27, 16.9 million people were receiving some form of unemployment assistance — 1.2 million fewer than the previous week.
Although the impact of the stimulus checks will fade, the optimism sparked by the rollout of the vaccines is raising hopes about the economy, even as the country continues to experience coronavirus infections.
Economists had previously predicted a "Biden boom," or a surge in spending that would take place once shoppers felt confident enough to start venturing out after months cooped up at home.
And the reports on Thursday showed evidence of that.
Sales of new clothes, sporting equipment and restaurant meals were especially strong in March, while online sales — a defining feature of pandemic isolation — rose by a comparatively modest 6%.
"There was definitely a pent-up demand to get out of the house," said Wayne Grantham, president of All Star Sports in Florence, S.C. "Whether it was baseball or soccer or hunting or fishing, I know across the board, outdoor activities have been well-received."
Higher consumer spending is likely having a beneficial impact across the economy.
"You see the economy opening," Federal Reserve Chairman Jerome Powell said Wednesday in remarks to the Economic Club of Washington. "I think we are going into a period of faster growth and higher job creation and that's a good thing."
There are still caution flags, however. New coronavirus infections jumped more than 11% in the last two weeks, and Powell cautioned that the rise of more contagious variants could upend the economic recovery.
"That's something we need to be careful about," Powell said. "I think we'd be wise to keep wearing masks and being socially distant at least for a while longer."
STEVE INSKEEP, HOST:
We have another of those regular numbers that gives us the shape and direction of the U.S. economy. This is a number for retail sales, and it shows dramatic improvement. We're going to talk about that now with NPR's Scott Horsley. Scott, good morning.
SCOTT HORSLEY, BYLINE: Good morning, Steve.
INSKEEP: What do the numbers show?
HORSLEY: This is a report from the Commerce Department. It shows, after a modest slump in retail spending back in February, there was a big surge in March. That February slump was blamed in part on severe winter weather, and March really looks like a dramatic spring thaw that came after that. Retail sales soared 9.8% last month.
HORSLEY: And the detail here is interesting. We saw especially strong sales of clothes and sporting equipment and restaurant meals. So you get the picture - people were anxious to get out of the house, get outside, enjoy the warmer weather and maybe feeling a new sense of pandemic freedom with some new vaccines coursing through their arms.
INSKEEP: I'm just kind of enjoying the notion of all these people, you know, kind of walking around for the last year in jeans or sweatpants around the house and saying, I've got to get some clothes, got to dress up.
HORSLEY: Time for some new clothes.
INSKEEP: I might actually see a human being sometime, you know?
HORSLEY: And then on the converse, online sales, which have really been the sort of symbol of our isolation during the pandemic, rose by a comparatively modest 6% last month. So all in all, this is a very strong retail report.
INSKEEP: What do you see with jobs?
HORSLEY: Yeah, there was positive news on the jobs front as well this morning. New claims for unemployment fell sharply last week. State claims down - were down to 575,000, which is still a big number.
HORSLEY: But it's the lowest it's been since March of last year, during the very first week of the pandemic lockdown. Claims under the federal program for gig workers and the self-employed were also down. And we saw a big drop in the number of people covered by emergency pandemic programs. So there's still a lot of folks out of work. As of late March, nearly 17 million Americans were getting some kind of unemployment assistance. But that is down more than a million from the week before.
HORSLEY: So numbers are moving in the right direction. And that's consistent, Steve, with the really strong March jobs numbers that we were reporting on last week.
INSKEEP: I just want to linger on this for a minute 'cause we're talking to millions of people, and a lot of those people have actually done better in the pandemic than normally - saved a lot of money, economically. But when you say half a million unemployment claims in a week and that is, like, unusually low, that's a lot better than it has been, that used to be catastrophically bad. That's a sign still of enormous churn in the economy. I just want to mark that for people who are doing well. There are a lot of people who are, in one way or another, doing very badly or just in transition right now.
INSKEEP: What does that mean for the larger U.S. economy?
HORSLEY: Well, the retail sales numbers are certainly encouraging. And as you point out, people who have kept their jobs during the last year have saved a lot of money, when they couldn't go traveling or go to concerts or whatnot. We've been expecting them to start spending some of those savings once they felt safe doing so. And on top of that, you've got the government pumping lots of money into the economy. This burst in spending in March coincides with the delivery of those $1,400 relief payments last month. So there's lots of cash floating around to power a recovery.
Federal Reserve Chairman Jerome Powell told the Economic Club of Washington this week he thinks we are at an inflection point, where we're going to be seeing faster economic growth, faster job growth in the months to come. But he cautioned that could still all be upended if there's a new surge in coronavirus infections. As we know, new cases are up about 11% in the last two weeks. There's also the risk out there of more contagious variants. Now we've had this pause in the Johnson & Johnson vaccine. So there are some potential caution flags out there, but still, very positive economic signals this morning.
INSKEEP: NPR's Scott Horsley. Thanks so much.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.