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.

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 SALES GREW 0.3 PERCENT IN MARCH

WASHINGTON – Retail sales in March increased 0.3 percent seasonally adjusted over February and 3.5 percent unadjusted year-over-year, according to calculations released today by the National Retail Federation. The numbers exclude automobiles, gasoline stations and restaurants.

“Various factors were at play in the first quarter, but we are again seeing a pattern similar to previous years — consumer spending was weak but is expected to pick up as we move through the year,” NRF Chief Economist Jack Kleinhenz said.

“A lack of pricing power continues to plague the retail industry,” Kleinhenz said, noting that Consumer Price Index numbers released today showed prices reversing course in March. “There is no doubt that weak pricing power led to the bumpy period for retailers in the first part of this year.”

On a three-month moving average, retail sales have grown 2.8 percent year-over-year. When looking at business lines, performance in March was again uneven as clothing and accessories and general merchandise saw slight gains while there were declines in building materials and supplies and sporting goods, likely due to winter weather. Nonetheless, the sectors with declines showed increases year-over-year.

A few specifics include:

  • Online and other non-store sales increased 0.6 percent over February and increased 11.4 percent unadjusted year-over-year.
  • Sales at clothing and accessories stores increased 1 percent seasonally adjusted from February but decreased 2.5 percent unadjusted year-over-year.
  • Sales at general merchandise stores increased 0.3 percent seasonally adjusted over February and remained even year-over-year.
  • Electronics and appliances stores’ sales increased 2.6 percent seasonally adjusted over February but decreased 0.4 percent unadjusted year-over-year.
  • Furniture and home furnishings stores’ sales decreased 0.3 percent from February but increased 3.3 percent unadjusted year-over-year.
  • Sales at building materials and supplies stores decreased 1.5 percent seasonally adjusted from February but increased 6.3 percent unadjusted year-over-year.
  • Sporting goods stores’ sales decreased 0.8 percent seasonally adjusted from February and decreased 4.7 percent unadjusted year-over-year.
  • Sales at health and personal care stores increased 0.1 percent seasonally adjusted over February and increased 5.3 percent unadjusted year-over-year.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy.

April 14, 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.”

RETAIL SALES GREW 0.2 PERCENT IN FEBRUARY

February retail sales grew 0.2 percent seasonally adjusted over January and 0.8 percent unadjusted year-over-year, according to calculations released today by the National Retail Federation. The numbers exclude automobiles, gasoline stations and restaurants.

“Sales growth held up well, given warmer than normal weather and tax refund delays,” NRF Chief Economist Jack Kleinhenz said.

“While consumers benefit by purchasing more for less, the top-line retail numbers reflect a lack of pricing power and, in many cases, hide underlying consumer demand.”

“While consumer spending in the first quarter has been erratic and most often weak, it registers positive improvement as the year continues,” Kleinhenz said.

On a three-month moving average year-over-year, retail sales have grown 2.8 percent. When looking at business lines, performance in February was very mixed as electronics and appliance stores saw declines while building materials and garden supplies saw solid growth.

A few specifics from the report include:

  • Online and other non-store sales increased 1.2 percent over the previous month and increased 8.2 percent unadjusted year-over-year.
  • Sales at clothing and accessories stores decreased 0.5 percent seasonally adjusted from the previous month and decreased 1.1 percent unadjusted year-over-year.
  • Sales at general merchandise stores decreased 0.2 percent seasonally adjusted over the previous month and decreased 1.4 percent year-over-year.
  • Electronics and appliances stores’ sales decreased 2.8 percent seasonally adjusted over the previous month and decreased 9.8 percent unadjusted year-over-year.
  • Furniture and home furnishings stores’ sales increased 0.7 percent over the previous month and increased 1.4 percent unadjusted year-over-year.
  • Sales at building materials and supplies stores increased 1.8 percent seasonally adjusted over the previous month and increased 3.7 percent unadjusted year-over-year.
  • Sporting goods stores’ sales decreased 0.4 percent seasonally adjusted over the previous month and decreased 6.7 percent unadjusted year-over-year.
  • Sales at health and personal care stores increased 0.7 percent seasonally adjusted over the previous month and increased 2.7 percent unadjusted year-over-year.

FOLLOWING JOB GAINS IN JANUARY, RETAILERS SCALE BACK IN FEBRUARY

Retail industry employment decreased by 31,300 jobs in February from January, offsetting gains made the previous month, the National Retail Federation said today. The retail numbers exclude automobile dealers, gasoline stations and restaurants. Despite the correction in retail, the overall economy gained 235,000 jobs in February, the Labor Department said.

“Mild weather contributed to retailers scaling back employment in February, reversing the gains the industry made in January,” NRF Chief Economist Jack Kleinhenz said. “However, the surge in consumer and business optimism may have propelled the economy-wide increase in jobs last month and supports our prediction for stronger consumer spending and retail sales for 2017.”

Average hourly earnings were up 2.8 percent year-over-year, compared with 2.5 percent in January.

The Labor Department said February unemployment fell to 4.7 percent, down from 4.8 percent in January.

RETAIL SALES UP 0.4 PERCENT IN JANUARY

January retail sales grew a solid 3.8 percent unadjusted year-over-year and 0.4 percent seasonally adjusted from an already-strong December, according to calculations released today by the National Retail Federation. The numbers exclude automobiles, gasoline stations and restaurants.

“The healthy monthly gain was driven by January’s strong payroll gains, retail employment gains and business sentiment.”
Jack Kleinhenz
NRF Chief Economist

“The retail industry started the year on a high note, continuing the momentum from the 2016 holiday season. The healthy monthly gain was driven by January’s strong payroll gains, retail employment gains and business sentiment,” NRF Chief Economist Jack Kleinhenz said.

“We haven’t seen strong January growth in several years, which indicates that consumers are increasing their spending and remain the leading driver of the economy,” Kleinhenz said.

There were broad-based monthly increases across the majority of sectors, with the exception of non-store, which was flat in January.

A few specifics from the report include:

  • Online and other non-store sales were flat over the previous month and increased 14.5 percent unadjusted year-over-year.
  • Sales at clothing and accessories stores increased 1 percent seasonally adjusted from the previous month and increased 0.4 percent unadjusted year-over-year.
  • Sales at general merchandise stores increased 0.9 percent seasonally adjusted over the previous month and decreased 1.4 percent year-over-year.
  • Electronics and appliances stores’ sales increased 1.6 percent seasonally adjusted over the previous month and decreased 1.7 percent unadjusted year-over-year.
  • Furniture and home furnishings stores’ sales were flat over the previous month and decreased 0.3 percent unadjusted year-over-year.
  • Sales at building materials and supplies stores increased 0.3 percent seasonally adjusted over the previous month and increased 6.6 percent unadjusted year-over-year.
  • Sporting goods stores’ sales increased 1.8 percent seasonally adjusted over the previous month and decreased 3.7 percent unadjusted year-over-year.
  • Sales at health and personal care stores increased 0.7 percent seasonally adjusted over the previous month and increased 9.4 percent unadjusted year-over-year.

More people shopped over Thanksgiving weekend than last year — but they spent less

About 154 million shoppers made purchases at stores or on e-commerce sites this holiday weekend, the National Retail Federation reported Sunday, a bump up from the 151 million people who last year participated in the annual barrage of Black Friday deals.

And though it is encouraging for the retail industry that more consumers opened their wallets this time around, it wasn’t all good news: Average spending per person was down to $289.19 from $299.60 in 2015.

Matt Shay, the chief executive of the National Retail Federation (NRF), attributed the decline in spending to just how deep and broad the discounts were over the four-day weekend. While the promotions offered during this period were probably preplanned and thus baked into the retailers’ sales plans, it could prove a troublesome dynamic for them if ultra-deep discounts end up being needed all season long to get people shopping.

But other factors could have contributed to the decline in per-person spending: Retailers have been spreading their Black Friday deals out over a longer stretch, so it’s possible that many people pounced on offers several days before Thanksgiving even arrived. And NRF’s survey found that about 122 million people plan to shop on Cyber Monday, up from 121 million last year. So perhaps some consumers are holding out for the fresh batch of deals that will arrive after the weekend comes to an end.

The survey results reflect the increasing importance of e-commerce in the retail landscape. This year, about 108.5 million people shopped online over the holiday season, compared with 103 million last year. Meanwhile, the number of people who shopped in stores fell to 99.1 million from 101 million last year.

Indeed, other data released this weekend offers evidence that online spending was strong on Thanksgiving and Black Friday. Adobe, which analyzed 22.6 billion visits to retail websites, reports that a record $3.34 billion was spent online on Black Friday, up 21.6 percent from the previous year. Sales on Thanksgiving Day were up 11.5 percent to $1.93 billion.

Adobe’s research found that top-selling items included iPads, Samsung 4K televisions and toys such as Lego Creator sets and the Barbie Dreamhouse.

The NRF had earlier projected that the retail industry would see a 3.6 percent increase in sales this holiday season over last year. That would be significantly better than the 3 percent growth registered in 2015. The trade group’s chief economist, Jack Kleinhenz, said Sunday that he believes that prediction “holds up pretty well” right now, even as some have asked whether the surprising election results might have altered consumers’ mind-set.

Experts say that in a presidential campaign year, we typically see that the election serves as a temporary distraction, with shoppers getting their gift-buying started a little later than they might otherwise. NRF’s survey seems to reflect that dynamic: About 23 percent of respondents said they hadn’t started their holiday shopping yet, compared with 19 percent last year. And a smaller share of people have finished their holiday shopping. This year, just 9 percent of shoppers have done so, compared with 11 percent last year.

 

November 27 at 3:53 PM

The Washington Post

Photo:Byron Siekavizza wheels his television to his car as he gets a jump-start on shopping for deals at Best Buy on Thanksgiving in Alexandria. (Nikki Kahn/The Washington Post)