Most consumers haven’t bought their Thanksgiving turkey yet, but it’s already the holiday shopping season in the minds of many retailers.
Wal-Mart Stores Inc., Target Corp. and others are aggressively advertising holiday specials online and in stores to get a jump on the spending spree that remains a k.
“Black Friday has become black November,” quipped Steve Barr, head of the U.S. retail and consumer sector at PwC, the accounting and advisory firm. That’s because so many retailers are rolling out their holiday price cuts well in advance of Black Friday, once the traditional start of holiday buying.
Although Black Friday remains a big shopping day, its import has been eroded by ever-earlier bargains, the growing clout of online shopping and retailers’ fear that the other guy is getting a jump on them. That competition anxiety was behind the push five years ago to open stores on Thanksgiving Day, and merchants are proving again this year that they can’t open their physical stores early enough to launch the season.
Wal-Mart, Kohl’s Corp., Toys R Us Inc. and several others plan to open on Thanksgiving again this year — some even earlier than in 2016 — a move that in past seasons drew grumbling from some consumers and retail employees unhappy with retail’s “Christmas creep.”
Brick-and-mortar stores are expected to lose more ground this year to the convenience of shopping by phone or computer.
E-commerce has become so pervasive that U.S. online retail sales this holiday season are expected to reach $107.4 billion this year, a 13.8% jump from last year and the first time they’ll top the $100-billion mark, the research firm Adobe Analytics forecasts.
Altogether, U.S. holiday retail sales (those for November and December) should climb between 3.6% and 4% this year, to as much as $682 billion, the National Retail Federation forecasts.
The economy is helping.
“The combination of job creation, improved wages, tame inflation and an increase in net worth all provide the capacity and the confidence [for consumers] to spend,” Jack Kleinhenz, the NRF’s chief economist, said in a statement.
And retailers are trying to cover every shopping preference and garner every possible sales dollar as they launch the holiday spending season, which can account for about 40% of a retailer’s annual revenue.
Indeed, it would be a mistake to confuse the woes of the retailers’ physical stores — which partly reflects that too many locations were built to survive the shift to online — with the notion that Americans no longer care as much to step foot in stores for “doorbusters” and other deeply discounted goods, analysts said.
After all, if online shopping is all the rage, why bother opening stores on Thanksgiving Day?
Because “a website can’t give you goosebumps” like those experienced in touching, buying and taking home the electronics, apparel and other goods bought during the holidays, Barr said.
“Let’s say you and I both want to buy a TV on Thanksgiving Day,” he said. “You go online and it’s going to be delivered in two to three days. I go to the store, get my TV and I’m home in an hour and watching it. It’s an emotional interaction, and that’s what they’re appealing to on Thanksgiving Day.”
The International Council of Shopping Centers, a trade group, said its latest survey indicated that 84% of shoppers on Thanksgiving weekend expect to head to stores. And 85% of the respondents said they expect that when they get there, their purchases will depend on deals or promotions.
That expectation of seeing tantalizing price cuts is partly the fallout from the surge in internet shopping, a segment in which the likes of Amazon.com have put huge downward pressure on prices.
Americans’ online purchases on Cyber Monday alone will climb 16.5% from last year to $6.6 billion, making it the largest online-shopping day in history, Adobe estimates.
The term “Cyber Monday” was coined by staffers at the National Retail Federation in 2005 when they noticed a jump in online sales following the Black Friday weekend.
Many consumers at the time had relatively slow internet connections at home. It became apparent that when they returned to work or school Monday, where they had computers with faster internet speeds, they shopped online.
Retailers seized on the trend and began heavily promoting Cyber Monday as another day for major holiday discounts. And now, of course, fast internet connections are ubiquitous on smartphones, tablets and desktop computers.
This year, Adobe Analytics expects that purchases made on mobile devices such as smartphones and tablets will account for 54% of all e-commerce holiday sales — the first time they’ll surpass online sales made on desktop machines.
Target Corp. and Best Buy Co. were among the retailers that released Black Friday promotional prices on hundreds of items last week — sale prices that will return on Thanksgiving Day and Black Friday.
Best Buy, for instance, was selling a 43-inch LG television at its “Black Friday price” of $279.99, which it claimed was a $150 savings.
Target and other retailers also heavily promoted “sneak peeks” of their Black Friday advertising fliers on their websites in hopes of luring consumers when Black Friday arrives.
Not every retailer will be open Thanksgiving Day, however.
Outdoor retailer REI Co-op also will close its 151 stores for the third consecutive year on Thanksgiving and Black Friday, a span in which it urges its customers and 12,000 employees to “opt outside.” REI said its website also would not process any online orders those days.
That doesn’t surprise Pam Danziger, who runs the retail consulting firm Unity Marketing. “Many consumers want Thanksgiving to be a pure holiday,” she said.
But Danziger said many chains still opt to open Thanksgiving Day “because they’re desperate to squeeze every last dollar out of their customers,” she said. “They feel like they have to, because the pressure is so high right now to avoid letting their competitors get an inch on them.”
Barr said there’s another reason why retailers open Thanksgiving Day: It’s a way for them to persuade customers to return before Dec. 25.
“If you make that experience as enjoyable as possible in stores on Thanksgiving or Black Friday, they’ll be back later in the holiday season,” he said. “Shoppers never forget how you made them feel.”
Employment fell in Northeast Ohio in September by an estimated 4,286 jobs, according to the latest Crain’s Employment Report (CER), attributable in large measure to a decline in vehicle production.
The drop represents a 0.4% decline in the local workforce. It puts the estimate of employment in the seven-county Northeast Ohio region employed at 1,169,431 people in September, down from 1,173,717 in August.
The region has lost 6,682 jobs, or 0.6%, from an estimate of 1,176,113 jobs in September 2016.
Cleveland Heights economist Jack Kleinhenz, who developed the CER model, attributed the decline to slower auto production. The goods-producing sector of the regional economy, which includes auto production and other manufacturing jobs, lost 3,601 jobs in September, a 1.7% decline, while the service sector, which employs four times as many people as the goods sector, lost only 685 jobs, for a lost of less than 0.1%.
U.S. auto production has slowed in recent months, declining from 326,000 units in August 2016 to 252,800 units in August 2017, according to data compiled by the Federal Reserve Bank of St. Louis. That has led to shutdowns or layoffs at the region’s auto plants. For example, General Motors Corp. scheduled nine weeks of down time at its assembly plant in Lordstown for 2017, according to the Youngstown Vindicator.
By contrast, construction contractors were experiencing a shortage of experienced labor, making it difficult to fill newly created positions, according to regional information in the Federal Reserve Bank’s September summary of economic conditions, or Beige Book.
The Beige Book also reports that disruptions to spending and production are expected to reduce economic activity nationally in the third quarter of the year but boost it in the fourth quarter. Kleinhenz, who is chief economist for the National Retail Federation, agrees with that outlook, as he expects hurricane-hit households to replace lost vehicles and to fix up damaged homes, while businesses in the path of the hurricanes return to full operations in the last quarter of the year.
“A key reason to remain upbeat about the outlook is the optimism evident in business and consumer sentiment surveys,” he reported.
He cited, for example, the University of Michigan’s Consumer Sentiment Index, which jumped 6.0 points in early October to 101.1, its highest level since the start of 2004.
“The surge appears to be driven by increased optimism about employment and income prospects,” Kleinhenz said, though he noted that the NFIB small business sentiment index dropped. However, the index still held at a level higher than a year ago.
By JOHN REID BLACKWELL Richmond Times-Dispatch Sep 8, 2017
Jack Kleinhenz, the National Retail Federation’s chief economist, spoke Friday morning at an economic outlook breakfast hosted by the local Retail Merchants group.
GREGORY J. GILLIGAN/TIMES-DISPATCH
Predictions of the demise of bricks-and-mortar retail because of online shopping are premature, an economist told Richmond-area merchants Friday as part of a mostly optimistic economic outlook report.
“Ninety percent of spending by consumers is still brick-and-mortar,” said Jack Kleinhenz, the National Retail Federation’s chief economist, speaking at an economic outlook breakfast hosted by the local Retail Merchants group.
“E-commerce is changing our lives, there is no doubt about it. It is going to gain,” he said. “I think that retailers who can adjust and incorporate e-commerce into various channels are going to be successful.”
Despite some high-profile retail store closings nationwide that have grabbed attention this year and raised questions about the impact of online shopping, retail store openings still have outpaced closings, Kleinhenz said.
He cited a report by IHL Group, touted on the National Retail Federation’s website, indicating there will be a net increase in retail store openings of more than 4,000 in 2017. In June alone, he said, there were 620,000 job openings in the retail industry.
“I am trying to suggest to you that the retail industry is a lot more healthy than it is made out to be,” he said.
Kleinhenz gave a mostly optimistic outlook for the economy, pointing to positive gross domestic product growth, falling unemployment rates and solid job gains as good signs for retail sales.
He declined to give a prediction for this year’s holiday retail sales, saying more data need to be collected before a forecast is done.
An informal, text-message poll about holiday sales expectations was conducted among the roughly 160 attendees at the event held at the Westin Richmond hotel. Of those who responded, 68 percent said they think sales will be up.
“I think the economy has been doing OK — it is a solid outlook,” Kleinhenz said. “We are getting very close to full employment, so we won’t see a lot of job growth.”
Potential negatives include uncertainty about federal government policies affecting business, and lackluster wage growth since the recession ended. “Wages have not moved up as fast as what we would have thought during an expansion,” he said.
As the chief economist for the largest retail trade organization in the world, Jack Kleinhenz’s days revolve around big data and economic forecasting models. With over 35 years of experience, Kleinhenz is well-versed in examining data patterns and trying to provide some perspective. “I’m a storyteller,” he says, and forecasting is “like a jigsaw puzzle.” Raw data is put into models and it’s Kleinhenz’s job to provide the narrative — a combination of art and science.
On this week’s episode of Retail Gets Real, Kleinhenz sits down in the podcast studio to explain how and why we forecast the economic future and what he thinks is on the horizon.
While economists use different models, they all use the same variables, so there are established core patterns. To measure income levels, for example, the Bureau of Economic Analysis collects data on a month-to-month basis, taking into account such factors as personal income, after-tax income and consumption levels. “These are estimates,” Kleinhenz clarifies. “They’re not perfect numbers.”
To get a more accurate picture, part of Kleinhenz’s job is to continually converse with retailers. “It’s kind of a moving picture we’re trying to figure out,” he says. Technological innovations have greatly changed the task of forecasting. The concept of big data is transformative; when information comes in real time instead of through surveys, it greatly increases the accuracy of predictions.
“The market has been changing and consumers have changed their behavior.”
“What’s going on in the financial markets and these stores does not necessarily mean that consumers have gone away and stopped shopping,” Kleinhenz says about the shifts taking place in the retail industry today. “The market has been changing and consumers have changed their behavior.”
Kleinhenz is optimistic about the future, saying the changes have more to do with demographics: The dense population in the U.S. Midwest 20-30 years ago, as one example, has moved to more urban areas in the Southeast and Southwest, and the shopping malls that catered to their needs do not attract as much demand anymore.
Another reason is that consumers don’t spend the way they used to. Younger consumers have drastically different buying habits, make life decisions later and seek more experiences — opposed to products — than older generations. “People still want to shop,” Kleinhenz says, “It’s recreational. It’s social.”
Listen to this week’s episode to learn why the perception of retail’s transformation is far from the reality, and catch up on some of our most popular past episodes, like Get ready for Gen Z and the future of the retail store.
Susan Reda is one of NRF’s co-hosts on Retail Gets Real. Meet all the co-hosts and learn more about the show.
ACE Report: Jobs jumped in July, but longer-term data is down
July was a good month for jobs in Northeast Ohio, as the region added 6,200 positions on a seasonally adjusted basis from June, according to the latest Ahola Crain’s Employment Report.
But dig a little deeper into the numbers and there’s less to be excited about.
For one, the July increase followed declines in the previous two months — losses of 5,527 jobs in June and 3,708 in May in the seven-county Northeast Ohio region. And, as Cleveland Heights economist Jack Kleinhenz, who developed the ACE Report economic model, pointed out in an analysis of the most recent data, the region’s estimated total employment of 1,173,216 in July represents 3,577 fewer jobs than the like month a year earlier.
The July total payroll estimate for the region also was ever-so-slightly below the six-month trend, which is 1,173,492, according to the ACE Report data.
Service-producing firms registered a larger share of the July increase, at 3,944 jobs, while the goods-producing sector showed a gain of 2,256 jobs, Kleinhenz reported. The report is based on payroll data from about 3,000 employers and is gathered by The Ahola Corp., a Brecksville-based payroll and human resources firm.
In his analysis, Kleinhenz wrote that the growth in regional employment last month “is consistent with July’s national employment release showing a solid increase of 209,000 jobs. The job gains are consistent with 2%-plus economic growth, steady consumer spending and Fed policy as currently projected for a December rate hike.”
The so-so ACE Report results are consistent with a Federal Reserve Bank of Cleveland report released on Thursday, Aug. 17, that found employment growth in Cleveland “has been weak,” and stated that while the economy here is growing, it’s doing so at a slower pace than that of Ohio and the nation as a whole.
Stronger growth could be ahead, Kleinhenz noted, as the U.S. economy “bounced back in the second quarter, growing at an estimated 2.6% on an annualized basis. This is more than twice the pace of the first quarter and brings expansion in the first half of 2017 close to the 2% underlying trend pace.”
The regional employment roller coaster continued in June with Northeast Ohio losing 5,518 jobs from the May total, as total private sector employment dropped to a projected 1,167,386 — a 0.47% loss. Looking year-to-year, past the monthly fluctuations, the job loss in the seven-county metropolitan area since June 2016 is 0.02%, or 290 jobs, according to the Ahola Crain’s Employment, or ACE, Report.
The June job loss was heaviest in the goods-producing section, which includes manufacturing and construction — 3,380 jobs lost between May and June versus 2,138 jobs lost in the larger service sector, which accounts for 82% of the private sector jobs tracked in the ACE survey.
Year over year, the goods sector lost 4,912 jobs versus a gain of 4,621 jobs in services.
Jack Kleinhenz, the Cleveland Heights economist who created the ACE Report model, said the losses are not a serious concern.
“Too much should not be made out of June’s decline,” he said. “It does not point to any major concerns for regional growth. The national and regional economies continue to wander forward at a moderate pace.”
Kleinhenz attributed part of the decline to the auto industry, a large employer in the region, and the summer shutdowns of auto plants.
The July 12 Beige Book, the Federal Reserve Bank’s report on the economy, noted that payrolls in the Fourth District, which includes all of Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia, continued to expand since the last Beige Book report released May 31, although at a slightly slower pace.
Longer term and nationally, Kleinhenz noted that the Institute for Supply Management (ISM) reported the manufacturing sector nationally grew in June and the overall economy grew for the 97th consecutive month. The ISM manufacturing employment index showed a 3.7% increase over May.
“The labor market remains very healthy and continues to show the confidence in workers willing to leave one job for another,” Kleinhenz said.
Closer to home, the recent Ohio Department of Jobs and Family Services, in its “2024 Job Outlook,” is projecting that employment in the region will grow by 74,700 jobs to 1,475,300 by 2024. That’s a 5.3% increase over the 1,400,600 employed in the 2014 base year. The projected growth will come despite a loss of 7,200 manufacturing jobs.
The growth sectors include health care (27,400 jobs), food preparation and serving (7,100) and transportation and material handling (5,000). Many of the jobs that are expected to grow the fastest were in low-paying occupations such as home health aide and restaurant cooks. The report also projected significant demand for registered nurses and computer systems analysts.
With a strong rebound in job growth last month, the labor market is back on solid ground. But workers are still struggling to get the substantial wage gains they’ve been craving since the end of the recession, economists said.
Here are the highlights:
The economy added 222,000 net new jobs, the Labor Department said — the best performance since February and well above analyst expectations.
The unemployment rate ticked up to 4.4% from May’s 16-year low, but because more people joined the labor force.
May’s job growth was revised up to 152,000 and April also was revised up, as part of a gain of 47,000 more total jobs for those two months than initially estimated.
Wages continued their steady but slow recent growth, increasing 4 cents to $26.25.
“Hiring is back to where it has been throughout much of the 8-year-old economic expansion,” said Mark Hamrick, senior economic analyst at financial information website Bankrate.com.
“Growth is modest, not spectacular, which is to be expected for a mature expansion.”
Job growth returns to 2016 pace
With June’s strong growth and the statistical revisions, monthly job gains have averaged 180,000 this year, close to last year’s level of 187,000.
On Monday, President Trump criticized the media for ignoring the “great jobs numbers” since he took office. The White House offered a muted response Friday, with Press Secretary Sean Spicer touting the job gains on Twitter as “great news” for U.S. workers.
Economists said the pace of job growth this year has not been great, but has been solid. And the bounce back in June allays any fears of a significant slowdown.
“This was a good jobs report. It suggests there’s still a fair amount of vitality in the U.S. labor market,” said Nariman Behravesh, chief economist at IHS Markit, a business research and analysis firm.
But the report probably overstated the strength of the market somewhat because it was boosted by a gain of 35,000 net new jobs in state and local government after the sector shed 8,000 positions in May, he said.
The June gains likely represent a temporary jump as school districts made new hires for the fall, Behravesh said. He expected job growth in coming months to be in the range of 150,000 to 180,000.
Retail gains jobs for first time since January
June’s job growth was boosted by large increases in hiring in the healthcare and social-assistance sector, as well as by local governments.
But the most notable move was by retailers. The sector added 8,100 net new jobs in June after shedding 7,200 the previous month.
From February through May, retail payrolls declined by 79,400 jobs as the sector struggled with the growing shift to online shopping.
“The gain in June shows that the industry is still very much meeting the demands of consumers and households,” said Jack Kleinhenz, chief economist for the National Retail Federation.
He cautioned that “one month does not make a trend,” a point echoed by other economists.
“We won’t see sustained employment growth in the retail sector,” said Cathy Barrera, chief economic advisor at ZipRecruiter, the Santa Monica job-hunting site.
“Between the competition with online options for consumers and for new technologies that are replacing workers in stores — self checkout is one example of that — I don’t think those jobs are going to be there in the long run,” she said.
A higher jobless rate is actually good
The unemployment rate rose 0.1 percentage point last month after hitting its lowest level since 2001 in May. But the increase, to 4.4%, was for a good reason — 361,000 people joined the labor force a month after it contracted.
That nudged up the percentage of working-age Americans either working or actively looking for a job to 62.8%. That labor force participation rate still is near a four-decade low, and economists said the increasing retirement of baby boomers makes it difficult to boost the level significantly.
The participation rates for men and women ages 25 to 54 have almost gotten back to their pre-recession levels, Barrera said. But for Americans ages 16 to 24, the recovery has been slower.
“It makes sense that this is the last group to recover,” she said. “There just weren’t a lot of jobs available for young people high school-age or college-age during the recession.”
Some of them have opted to stay in school longer to boost their job qualifications, Barrera said. Getting those Americans back in the workforce will help tighten the labor market and lead to increased wages.
Wage growth is still struggling
Average hourly earnings increased 4 cents last month to $26.25, a slight improvement over May’s gains.
For the 12 months ended June 30, wages have increased 2.5%. That’s a slight increase over the 12-month period ended May 31 and above the low rate of inflation. But it’s still short of the stronger growth economists have been hoping for as the labor market tightens.
“If wages accelerate, that will encourage more people who might have given up looking for work to start looking again,” said Jed Kolko, chief economist with employment website Indeed.com. “That’s why wages are an important and the most troubling piece of the puzzle right now.”
With unemployment low, employers should be forced to increase wages to lure new workers and keep existing ones.
But some of the biggest job gains in June were in lower-wage sectors, like healthcare and temporary workers, which kept wage growth down, Kolko said
“It’s unclear how much the slower wage growth is due to long-term factors, like productivity slowdown and demographic shifts, and how much of it could be reversed by a tighter labor market and employers bidding up wages,” he said.
Federal Reserve monetary policymakers have been expecting faster wage growth as the unemployment rate falls.
Still, the job-creation figures for June should provide relief to central bank officials, who have been increasing a key short-term interest rate in large part because of the strength of the labor market.
In June, the Fed nudged the rate up for the third time in six months. Even though the pace of job growth has moderated this year, Fed Chairwoman Janet L. Yellen said the labor market “continues to strengthen.”
If job growth remains solid, the Fed is expected to raise the rate again before the end of the year.
After hitting a low point during the recession in December 2009, the retail sector has reliably been churning out more jobs. Though the Labor Department’s monthly employment summary provides only a snapshot of the labor market, this is the second month in a row that retail payrolls have registered substantial losses — a possible sign that larger structural changes are in the works.
“E-commerce and technology have absolutely changed the rules of the game and given massive amounts of power to the consumer,” said Simeon Siegel, a retail analyst at Nomura. “There is a self-help mentality now. People walk around with their phones in their hand to tell them the best model and the best price. You don’t need as many people walking around trying to convince you to buy a sweater.”
The vitality of the retail sector has been muscled out of the spotlight lately by a focus on better-paying manufacturing jobs, which President Trump sees as crucial to the revival of the middle class, particularly in the Midwest and the South. But retail outlets still employ millions of Americans and serve as an entry point into the labor force, especially for those with less education and fewer skills.
Remember that while General Motors was once the single largest employer, today Walmart is.
Workers in the 1970s at a General Motors plant in Detroit. The automaker was once the single largest private employer in the United States.
DAN DMITRUCK / UNITED PRESS INTERNATIONAL
Yet even Walmart is having to contend with a sea change in the way people shop. The company, for instance, has been closing smaller stores in rural areas, according to Barbara Denham, a senior economist at Reis, a real estate data and analytics firm.
Jack Kleinhenz, the chief economist at the National Retail Federation, does not discount the magnitude of the transformation that is occurring in retail, but cautioned that the monthly job figures are also highly subject to temporary vagaries. “One of the challenges we have at this time of the year is the quirkiness of seasonal forces,” he said.
An unexpectedly warm February and snowy March and the late arrival of Easter could have elbowed the numbers in an uncharacteristic way.
The retail employment number, he said, does not necessarily “translate into backsliding of retail sales.”
Diane Swonk, the chief executive of DS Economics in Chicago, agreed. The falloff in hiring “is not a reflection of a consumer than can’t spend, but rather of how they spend,” she said. “Retail is one of the largest employers in the country, and it’s going to go through a pretty massive secular restructuring. We shop differently now, and no one has the right model.”
Most shopping is still done in person rather than online, but shopping patterns are shifting. Ms. Swonk mentioned research that shows consumers like to buy online but return things to bricks-and-mortar stores.
“Clearly, it’s just not one or the other, not just bricks or clicks,” she said. But the marketplace is rapidly changing and retailers “are not sure what the endgame is.”
E-commerce may cause a drop in retail jobs, but a rise in warehouse, distribution and transportation jobs.
At the same time, consumers have not only been changing how they shop, but what they buy. Ms. Denham noted that while the entire retail sector ended up down nearly 30,000 jobs, the restaurant industry showed a gain of 20,000 in March on top of steady previous growth.
“There’s been a shift in consumer spending from things to experiences,” she said, “that’s why restaurants are doing so well.”
Dr. Jack Kleinhenz of Kleinhenz & Associates placed first for his 2-year, 3-year, and 4-year horizon projections ending in 2016 based on the Pulsenomics Home Price Expectation Survey. He will receive the Crystal Ball Award from Pulsenomics for the accuracy of his projections.
Pulsenomics® is an independent economics research and consulting firm that delivers product strategy and marketing solutions for corporate and institutional clients. Their expertise is in the U.S. housing and capital markets, and in data analytics and exchange-traded financial products.
Pulsenomics also conducts primary research via scientific household surveys and expert survey panels, and develops authoritative indexes that provide unique insight concerning the economy. It was founded by Terry Loebs, and its Honorary Advisors are Chip Case and Robert Shiller.