Last week at the American Economic Association meetings, held online, many papers focused on Covid-19. A good example was the session organized by Dominick Salvatore which included Jan Eberly, Raghu Rajan, Carmen Reinhart, Joe Stiglitz, Larry Summers, and me. Most papers focused on the economic policy impact of the Coronavirus. I focused the “supply side” policies rather than on the “demand side” policies. Using a simple model, key facts naturally emerge if one simply divides retail sales into store-sales versus non-store-sales or electronic sales. To see this, take a look at these three figures.
The first figure shows that the onslaught of the pandemic in the second quarter of 2020 immediately caused a sharp decline in retail sales less non-store sales in the United States. This was followed by rebound in the second third quarter of 2020. Note that the rebound, while very sharp, left total retail sales in stores no greater than they were before the pandemic.
The second figure shows that non-store sales increased from the time the pandemic began, just as in-stores sales were collapsing. Without non-store sales, total retail sales would have declined.
And the third figure shows an alternative measure: electronic-commerce. It is only available on a quarterly basis but tells the same story as the in-store versus non-store story—a large increase starting at the time of the pandemic.
In sum, the pandemic had a big economic impact on in-person store sales, measured by total sales less non-store sales. But there is a countervailing positive effect through non-store sales or e-commerce.
As of this writing, the increase in non-store or e-commence sales is not abating, but rather continues to rise, even after in-store sales have rebounded. Regulatory policy, tax policy, monetary policy and even international policy must encourage this supply-side growth, not thwart it, if the economy is to continue to grow and create jobs.