| It's now clear just how deep of a hole the U.S. economy is in. Digging out is likely to be an uneven proposition. A week after the government reported the largest single-month tally of job losses ever, a new set of unhappy milestones came into view Friday. Retail sales dropped 16.4% last month, an inevitable consequence of the effort to lock down the country and blunt the effects of the pandemic. At the same time, the Federal Reserve's gauge of industrial output also plunged, falling 11.2%, the most in more than a century—a span of time that includes the Great Depression. The chain of consequences is easy to track: With fewer Americans working, they're spending less money and manufacturers have much less demand to meet. For the retail industry, the pandemic converged with and hastened a long-term reckoning brought on by radical changes in the way people shop. Covid-19 has accelerated that shift, but it didn't start it. For stores to come back, retailers will have to make a leveraged bet on a return of old habits. Whether the virus has changed the way people think about shopping in stores will take time to sort out, and retailers may yet benefit from a burst of pent-up demand once the nation's lockdowns lift. But the damage done to the job market means that for many people, spending just won't be what it was for a long time. Consumer spending remains by far the largest driver of U.S. economic activity, and so any rebound in manufacturing will inevitably depend upon Americans being willing once again to open up their wallets. But the loop that leaves employment, output and consumption locked in means that generating meaningful momentum for an economic recovery will be hard—and could get even harder if Covid-19 makes a widely predicted rebound in the fall. A separate report out Friday suggested that while consumers are more upbeat than expected for now, aided by federal stimulus checks and low gasoline prices, over the long term they are warier about the economy's prospects. As the weather warms and more businesses try to get back to normal, sentiment may turn sunnier, even as a second wave threatens to blot out the silver lining.—Tim Annett | 
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