Executive Cotton Update: December 2021

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U.S. Macroeconomic Indicators & the Cotton Supply Chain

Macroeconomic Overview

The U.S. economy was estimated to have added fewer jobs last month. Nonetheless, the unemployment rate posted a significant drop (-0.4 percentage points). At its current level, the unemployment rate is only 0.7 points above the value before the pandemic (3.5% in February 2020). Before COVID, the unemployment rate was exceptionally low, reaching its lowest level in five decades. The current value is also low by historical standards. There have been only three periods since the 1970s when unemployment was below five percent.

Inflation rates were also low before COVID. One contributing factor to the low rate of inflation ahead of the outbreak was sluggish wage growth. After the last recession and before COVID, wages did not grow more than 3.5% year-over-year. Since COVID, wage growth has been as strong as 8.2% year-over-year (April 2020) and has been holding to levels over four percent for the past five months. Higher wages imply higher costs for employers. As additional employment costs are passed on to consumers, it can lead to inflation.

Inflation can affect consumer spending. If inflation exceeds wage growth, consumers cannot purchase the same volume of goods and services. The current rate of overall inflation is 5.0%. Since June, it has been nearly even with wage growth but was more than one percentage point higher than wage growth in April and May. However, wage growth was three or more points higher than inflation during the other COVID months. Although current inflation rates suggest that much of the current wage growth is needed to simply cover price increases, the separation in the recent past resulted in the accumulation of savings that can support spending despite rising prices.

In addition, several categories of goods and services experienced sharp decreases in prices during COVID. A notable example is clothing, where average retail prices declined as much as 8.7% year-over-year. Year-over-year rates of inflation for clothing have been relatively high in recent months (4.1% in October). Nonetheless, they have not been enough to pull prices above the levels before the pandemic and were -3.1 lower in October 2021 than they were in February 2020.

The accumulation of savings and lower prices for apparel could support consumer spending throughout the holiday season. Consumer confidence has been a little lower since case counts in the U.S. began their latest climb, and the Omicron variant is a reminder that the virus is still a threat to health and economic activity. Nonetheless, expectations are that holiday spending will be strong this year.


In November, the U.S. economy was estimated to have added +210,000 jobs. Revisions to figures for previous months were positive. The estimate for September rose +67,000 to +379,000. The estimate for October rose +15,000 to +546,000.

The 12-month average for job gains is +474,000. Since COVID, there has been a net loss of -4.2 million positions. The unemployment rate dropped 0.4 percentage points to 4.2%. After the financial crisis, it took eight years for the unemployment rate to reach this level.

Consumer Confidence & Spending

The Conference Board’s Index of Consumer Confidence was virtually unchanged in November (+2.1 points, to 109.5). The current value is well above the long-term average of 93. The current value is also below the recent high point reached in June (128.9) and below the levels near 130 that were common before the pandemic. Year-over-year, the index was 16.6 points lower in November.

Overall consumer spending increased 0.7% month-over-month in October. Year-over-year, spending was up 6.6%. Apparel spending was up 0.8% month-over-month and up 16.4% year-over-year. COVID can distort comparisons against figures from 2020. Relative to October 2019, overall spending was up 4.9%, while spending on apparel was 26.0% higher. The long-term average annual growth rate in spending on clothing is near 2.0%, so recent growth in apparel spending has been exceptional.

Consumer Prices & Import Data

The CPI for apparel edged slightly higher in October. Despite recent increases, average retail prices are still lower than before the pandemic (-3.1% in October 2021 versus February 2020, seasonally-adjusted data). COVID caused retail clothing prices to drop as much as 8.7% year-over-year (May 2020). Year-over-year, prices were 4.1% higher in October.

Average monthly prices per square meter equivalent have increased for seven straight months. This has been coming off the record low set in March 2021 ($2.95/SME in seasonally-adjusted data). The latest average cost per square meter (SME) is $3.27/SME (October). This figure is -2.4% lower than before COVID ($3.35/SME in February 2020). Given increases in fiber prices in recent months and the ongoing shipping crisis, import costs can be expected to continue to increase in the coming months.

View the full report and charts.