Brick and mortar retailers continue to see declining sales. Reported Unemployment is below 7% yet consumers continue to hunker down. Is this an oxymoron or is something else transpiring.
Boston Federal Reserve President Rosengren’s speech on February 6, 2014 may shed some light on the subject outlining his view of the unemployment rate may shed some light.
First, let’s look at the retail reporting for January 2014.
- Walmart – reporting expectation in the red on same store sales for the month of January and believes the holiday shopping season will reflect a decline from the previous year.
- Walmart is blaming reduction in FOOD STAMPS and utility costs incurred by its low income customers.
- Retailers report demand was not there in January following a push to move inventory during the holiday sales season.
- Shoptrac reports overall January sales increase of 2.7% which is 2% less than 2013.
- Lululemon, a traffic tracker, reported meaningful reduction
- Amazon reported lower than expected 4th quarter sales growth and had a disappointed outlook for this quarter.
- Weak retail sales is impairing some manufacturers and associated enterprises – Re: Mattel reported 10% decline and Starbucks reported weak sales at Mall locations.
A closer look at the employment data may provide some insight into the situation.
President Rosengren states “While the narrow measure of unemployment has been improving, the broader measures from the Bureau of Labor Statistics show that over 20 million Americans are currently either unemployed, are marginally attached to the labor force (including “discouraged” workers), or are working part time when they would prefer full-time work…..The broadest measure is particularly striking. It includes people who are available to work full time but have had their hours reduced, or can only secure part time work. “Even at this point in the recovery, the measure is still nearly four and a quarter percentage points or 6.5 million people above the pre-recession average,” said Rosengren. “The large number of individuals working part time for economic reasons highlights the need for much more improvement in labor markets.”
The graph below clearly shows the real data. Reported unemployment is 6.7%
Figure 4: U-5 – Total Unemployed, Plus Discouraged Workers, Plus All Other Persons Marginally Attached to the Labor Force as a Percent of the Civilian Labor Force Plus All Persons Marginally Attached to the Labor Force
January 1994 – December 2013
What we do not know is the characteristics of this sector. It obviously includes low income earners, but what about the professionals that fell on hard times in IBanking, restructuring, legal work, financial consulting, IT consulting, executive search, and others. These professionals are not low income earners. They may or may not be included in the data above. If they are not the data may be somewhat worse as they tend to spend when life is good. They might be employed but earnings are a fraction of historical norms. Life appears not to be so good.
Are we actually looking at an unemployment rate over 10%?