Economic outlook seems positive for retailers, economist says

By JOHN REID BLACKWELL Richmond Times-Dispatch Sep 8, 2017
Jack Kleinhenz

 

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.

jblackwell@timesdispatch.com

(804) 775-8123

How and why NRF forecasts the economic future

August 07, 2017
Susan Reda

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.

Jack Kleinhenz in the podcast studio

https://nrf.com/news/how-and-why-nrf-forecasts-the-economic-future

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.”
Jack Kleinhenz

“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

ACE Report: Jobs jumped in July, but longer-term data is down

Scott Suttell

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.”

ACE Report: NEO goods-producing sector takes biggest jobs hit in June

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.

Seasonally Adjusted Data

Month Non-Farm Small (1-49) Mid-Sized (50+) Goods-producing Service Producing
Dec 2016 Actual 1,169,560   476,230  693,330 210,690 958,870
Jan (est) 1,175,104   478,434  696,670 212,456 962,648
Feb (est) 1,177,120   479,248  697,872 212,924 964,196
March (est) 1,175,534   478,604  696,930 212,610 962,924
Apr (est) 1,176,482   479,069  697,413 211,641 964,841
May (est) 1,172,905   477,697  695,208 209,786 963,119
June (est) 1,167,386   475,617  691,770 206,406 960,980

July 21, 2017

By  

Strong June rebound signals job growth is solid again — but substantial raises remain elusive

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

Customers shop at an Aldi grocery store in Chicago on June 12.
Customers shop at an Aldi grocery store in Chicago on June 12. (Scott Olson / Getty Images)

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

(@latimesgraphics)

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.

L.A. Times

July 7, 2017

 

Retail Payrolls Sustain a New Blow as Shopping Habits Shift

The New York Times
By PATRICIA COHEN

Doors at many Macy’s, Sears and J. C. Penney stores may still be open, but some of the jobs they once supported are starting to vanish.

General merchandise stores shed 34,700 jobs in March, the government announced Friday, the single most disappointing figure in a generally disappointing jobs report.

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.

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, Winner of Pulsenomics Crystal Ball Award 2017

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.

ACE Report: NE Ohio job-creation engine sputtered at the end of 2016

by SCOTT SUTTELL
The end of 2016 was not kind to Northeast Ohio’s job market, according to the latest Ahola Crain’s Employment (ACE) Report.

Seasonally adjusted employment in December for the seven-county area of Cleveland and Akron measured by the report was 1,170,985, a decline of 1,879 jobs from 1,172,864 in November. And November was no great shakes, either; its total job number was just 286 higher than the October figure calculated in the ACE Report.

Jack Kleinhenz, the Cleveland Heights economist who created the ACE Report model, noted in an analysis of the December data that the seasonally adjusted jobs figure for last month “is below its three-month and six-month average and suggests economic activity and job growth has lost some momentum from the faster pace that was evident in prior months.”
But it’s impossible to draw firm conclusions from one subpar month in one statistical category.

Kleinhenz wrote in his analysis, “We are not sure that the regional economy has made a fundamental change, nor has the national economy, since employment is only one gauge that measures economic activity.” He noted, for instance, that a gauge of economic activity created by the Federal Reserve Bank of Philadelphia rose in Ohio by 2.2% on a year-over-year basis, and recent construction and retail sales data “also show gains.”

Kleinhenz added that “choppy employment” around the end of a calendar year “is not unusual given shifting seasonal hiring patterns. It is typical for the trajectory of monthly employment to be pared significantly back. We expect a similar pattern to take place and recognize that some dampening of the pace of employment gains is projected.”

Kleinhenz wrote in his analysis that regional initial unemployment claims, a factor in the ACE Report model, had been at “historically low levels” but then “kicked up in the middle of December.” Such claims “are usually variable around the holidays because of winter weather, school closures and shifting seasonal hiring patterns,” according to Kleinhenz.

Meanwhile, he wrote, January employment “looks to be a better month based upon a reduction in initial unemployment claims.” Also, he noted that “most measures” of consumer and business sentiment “have shown notable improvement since the November election, raising expectation that economic activity will accelerate at the national and regional levels.”

The national economy “is expected to gain further traction in 2017,” according to Kleinhenz. “Regional growth during 2016 might have been stronger had it not been for weakness in metals production and the energy industry. In addition, the weak global economy and a strong dollar hurt export related firms output and associated employment.”

Despite these developments, he wrote, “the regional outlook (is) promising as national indexes tracking production and new orders in the most recent ISM (Institute for Supply Management) survey rose to levels posted in late-2014.”

Month Non-Farm Small(1-49) Mid-Sized Goods Service
(50+) Producing Producing
June 2016 (act) 1,167,272 475,237 692,035 211,159 956,113
July (est) 1,175,080 478,077 697,003 217,432 957,648
Aug (est) 1,171,211 476,665 694,546 214,391 956,821
Sept (est) 1,169,702 476,139 693,563 212,852 956,851
Oct (est) 1,172,614 477,287 695,327 213,914 958,700
Nov (est) 1,172,864 477,358 695,506 214,400 958,463
Dec (est) 1,170,985 476,588 694,397 214,137 956,848

Recent Month’s Estimated Change
Nov ’16 to Dec ’16 (1,879) (770.15) (1,108) (264) (1,615)
Diff from Dec 2015 1,757 883 874 (2,085) 3,842

Trend
3-month 1,172,154 477,078 695,077 214,150 958,004
6-month 1,172,076 477,019 695,057 214,521 957,555

ACE Report: Service sector sparks October jobs gain

The region reversed two months of job declines in October, adding 2,498 jobs, according to the Ahola Crain’s Employment (ACE) Report.

Seasonally adjusted, the region saw employment rise to 1,171,849 from 1,169,351 a month earlier, a 0.2% increase.

While the service-producing sector shows a year-over-year gain of 5,407 jobs, the goods-producing sector declined by 2,181 jobs. Smoothing out the month-to-month figures, on a year-over-year basis, the seven-county workforce increased 3,226 jobs, a gain of 0.3%, since October 2015.

The regional decline in the goods-producing sector echoes the national pattern. The United States lost 9,000 manufacturing jobs in October, according to the Bureau of Labor Statistics.

“Service employment has been growing, but manufacturing payrolls are either sluggish or declining,” reported Jack Kleinhenz, the Cleveland Heights economist who created the ACE model. “The factory sector continues to face stiff headwinds, including weak global demand due to sluggish growth abroad, a strong dollar and low commodity prices.

Longer term, employment in the goods-producing sector peaked in July 1979 at 25,163,000. Since then, sector employment has declined by 5,548,000 — or 22% — to its current level of 19,615,000. Those jobs have been lost largely to automation and shop-floor tracking systems that increase efficiency and, to a lesser degree, to globalization.

A bright spot at the national level, Kleinhenz said, is the 0.4% gain in average hourly earnings, up 2.8% over the past year.

Economists at Pittsburgh-based PNC Financial Services Group called that growth in average hourly earnings the fastest increase in seven years.

“As the job market gets tighter, firms are responding to tougher competition for workers by raising pay,” the financial services firm said in its Nov. 4 economic report. “This is very good news for incomes and consumer spending.”

The Federal Reserve Board’s most recent Beige Book, which gathers anecdotal information on each region of the country, said of the Cleveland region, “Wage pressures were most evident in the construction and retail sectors across skill levels. Reports from staffing firms about job openings and placements were mixed, though all contacts noted an increase in the number of temporary positions.”

Seaonally adjusted data

Custom-Chart-1
Month Non-Farm Small (1-49) Mid-Sized (50+) Goods-producing Service Producing
Mar-16(actual) 1,175,919   478,541   697,378 215,829 960,090
April (est) 1,169,858   476,032   693,826 215,323 954,536
May (est) 1,174,111   477,748   696,363 216,312 957,799
Jun (est) 1,172,025   476,883   695,141 216,156 955,869
Jul (est) 1,175,213   478,117   697,096 217,662 957,551
Aug (est) 1,171,067   476,593   694,474 214,553 956,515
Sept (est) 1,169,351   475,985   693,367 212,954 956,398
Oct (est) 1,171,849   476,981   694,868 213,697 958,152