National Retail Federation

MONTHLY ECONOMIC REVIEW: OCTOBER 2015

Posted on by Jack Kleinhenz

National Retail Federation

Consumers remain resilient economic force — as long as they continue to spend

Households continue to do their part to keep the economy growing despite global crosswinds and a stronger dollar that restrained economic activity this summer. Though restrained, consumer spending is strengthening and the drop in energy prices is freeing up cash in consumers’ wallets to spend on big ticket-items and other goods and services. This bodes well for the ever-important upcoming holiday season.

Retail sales have been softer than expected recently, perhaps impacted by increased volatility in financial markets. But the most recent rebound in consumer sentiment suggests consumers are feeling more optimistic about current conditions and have favorable expectations about the near term.

Housing has been a bright spot in the in the economy and continues to be a positive force. Solid job growth, improving consumer confidence and still-low home mortgage rates are all propelling the housing market. This is a good sign since newly purchased homes need to be outfitted with retail products.

Inflation was modestly stronger in September, but it has been difficult to pass on higher prices as consumers remain price sensitive. Most of inflation increases have come in the services sector.

More drama could come this winter if Congress does not move quickly to complete work on the federal budget and debt ceiling. Continued debate would fall in the middle of the holiday season. If the issue amplifies on Capitol Hill, we could see a shift in consumer spending intentions.

Download this month’s report, which includes the following highlights:

  • Retail sales and holiday sales forecast
  • Job growth
  • Consumer prices
  • Gross Domestic Product
  • Job openings
  • Housing market index
  • Personal income and spending

MONTHLY ECONOMIC REVIEW: KEEPING AN EYE ON CONSUMER ELECTRONICS SPENDING

Posted on by Jack Kleinhenz

While the fundamental forces of shopping behavior are economic — including income levels, credit, wealth, job prospects and confidence — there’s another force that has a tremendous impact on how, when, where and even why people shop: technology.

With well over 30 million smartphones and tablets in the country, it is easier than ever for consumers to find ways to connect with their favorite brands and service providers.

One of the barometers of consumer expectations around technology spending is produced monthly by the Consumer Electronics Association. The CEA Index of Consumer Technology Expectations is a forward-looking indicator derived from a monthly survey that provides users valuable information about the purchase of consumer electronics over the ensuing months.

With the 2015 holiday season just around the corner, I’m already assessing what the trends will be around spending on new iPhones, tablets and other electronics. My colleague Shawn DuBravac, chief economist at the CEA, noted recent readings of their index indicate a steady pace of spending in the near future.

NRF’s holiday forecast comes in early October and like we do every season, we’ll be keeping a close eye on spending in this area.

This month’s full report includes these highlights:

Retail Sales

August retail sales, excluding autos, gas and restaurants, advanced 0.2 percent from July and are up 2.6 percent on a year-over-year basis.

Consumer Sentiment

The University of Michigan consumer sentiment index dropped 6 points to 85.7 in September.

Consumer Prices

The August headline consumer price index decreased 0.1 percent following a 0.1 percent gain in July and a 0.3 percent increase in June.

Gross Domestic Product

The second estimate of second quarter GDP surged to 3.7 percent following the initial estimate of 2.3 percent.

Housing

The National Association of Home Builders Index of Builder Sentiment rose to 62 in September, gaining 1 point from the previous month.

Employment

Private sector payrolls increased by 140,000 in August. Overall employment(public and private sectors combined) increased by 173,000 in August.

Retail Jobs and Openings

Employment in August, excluding automobiles, gas stations and restaurants, increased 6,700 to 12.87 million jobs seasonally adjusted, a gain of 202,000 from August 2014 employment.

Personal Income and Spending

Personal income increased 0.4 percent in July while personal spending increased 0.3 percent.

Leading Economic Index

The Conference Board’s Leading Economic Index increased by 0.1 percent in August and is 4.0 percent higher than August 2014.

MONTHLY ECONOMIC REVIEW: THE IMPORTANCE OF JOB OPENINGS AND HIRING DATA

Posted on by Jack Kleinhenz

No one ever said being an economist was easy, and when it comes to trying to map the current economic recovery, it continues to be most challenging and at times perplexing. From gross domestic product and consumer confidence to housing starts and unemployment, there are myriad ways to measure where we’ve been and where we’re going. However, one of the most telling sets of data is the monthly Job Openings and Labor Turnover Survey, known as JOLTS.

JOLTS collects data on job openings, hiring and “separations,” or employees leaving their jobs, giving us a much better look at all positions that are open — not filled — on the last business day of each month. A job is considered “open” only if a specific job exists, the work could start within 30 days and the firm is actively recruiting to fill the slot, thus painting a picture around business hiring intentions.

Hiring and separations are employer/employee relationships created or ended during the month. These include workers moving into and out of jobs or measures of “churn” in the labor market. All types of jobs, including full-time, part-time, seasonal and short-term, are counted. One important takeaway: If the number of workers quitting their jobs rises, which is included in separations figures, it implies that Americans are likely “confident” enough to leave their jobs and search for others. This release lags the larger Bureau of Labor Statistics monthly employment report.

Journalists, investors and traders, economists and policymakers have taken a special interest in JOLTS since the economic recovery began in June 2009. In fact, the Federal Reserve regularly cites JOLTS in discussions over whether to increase interest rates. It is one of Fed Chairwoman Janet Yellen’s favorite indicators. At a recent National Association for Business Economics policy conference, Yellen said “I am likely to supplement the data on employment and unemployment with measures of gross job flows, such as job loss and hiring, which describe the underlying dynamics of the labor market.”

With a slowly improving economy, this monthly release has become a much-followed gauge on the direction and pace of the economy. Here’s how the most recent JOLTS reports indicate that the retail industry is healthy and has returned to prerecession levels. (JOLTS data includes total retail employment for all retail sectors. NRF-defined segments, which exclude automobiles and gasoline, cannot be broken out.)

  • Retail job openings edged up for a third straight month to 539,000 in June. That was the largest number of openings in June in the past 15 years, suggesting that retailers are having success in filling jobs.
  • Hiring, which lags behind openings, increased in June to 792,000 from 782,000 jobs and was the strongest since November 2006, the month before the start of the “Great Recession.” It was also the highest level for any June since the country’s prior recession ended in November 2001. The “openings and hires measures” indicate employers are trying to fill more openings, signifying their contributions to the labor market and confidence in the economy.
Retail Hires and Openings
  • Total separations ticked up to 762,000 in June from 745,000, largely driven by workers quitting their jobs. This June had the fourth-largest separation level for any June since the series begin in 2000. While the term “quit rates” sounds negative, it has positive significance – an increase in quits implies that workers are confident enough to voluntarily leave current jobs for better ones. addition

Hires usually outnumber total separations, but during the Great Recession there were more separations than hires.

Retail Hires, Total Separations and Employment
All in all, the retail industry labor market is healthy relative to pre-recession levels, and recent trends show the retail industry and the broader labor market continue to tighten, which should put upward pressure on wages.

EXPECTATIONS OF STRONGER JOB GROWTH SHOULD LIGHT A FIRE UNDER RETAIL SALES FOR THE REST OF THE YEAR

Posted on by Jack Kleinhenz

Many say the only constant in life is change, and nothing could be truer for the retail industry. When it comes to retail sales, which depend on a multitude of factors but mostly the confidence and ability of consumers to spend — both on necessities and discretionary purchases — retailers know change is guaranteed.

Given that we are now at the mid-point of the year, it’s important to reassess where the industry stands as it relates to overall expected sales growth. There are plenty of factors to consider, and given the fluctuations in economic activity through the first half of the year, we believe it is necessary to adjust for the significant variances seen thus far in sales and consumer spending.

NRF in February forecast that retail sales would increase 4.1 percent through the year, including online and other non-store sales. Unfortunately, that outlook has not played out precisely as anticipated. A confluence of events — including treacherous weather through most of the winter, West Coast port disruptions, a stronger U.S. dollar, weak foreign growth and declines in energy sector investments — all significantly impacted retail sales so far this year, and have changed how future sales will shape up for the rest of the year. Additionally, household spending patterns have also recently shifted purchases toward services more than purchases of goods — another contributing factor to lackluster sales results.

As such, NRF is now forecasting that retail sales — excluding automobiles, gasoline stations and restaurants — will increase only 3.5 percent for the year. Online/non-store sales, which are included in the overall figure, are expected to grow between 6 and 8 percent the remainder of the year rather than the 7-10 percent initially forecast for the full year. And we expect gross domestic product to increase between 2.7 and 3 percent during the second half.

While many of the aforementioned factors will not likely be repeated in the coming months, there are some that could linger and somewhat cloud the economic outlook. The impact of the strong U.S. dollar on trade and lower oil prices on energy investments remain as headwinds and could further temper the pace of economic growth.

However, recent economic indicators do suggest that the economy is turning a corner, fortunately putting to rest any concerns that the expansion has stalled. My second-quarter estimates for economic growth are now above 2 percent, which suggests that first-quarter weakness was more of an aberration than a continuing trend. And the job market continues to make strides with nearly 3 million more jobs than a year ago.

We think we’ll see a better second half of 2015. Real consumer demand has actually been stronger than what nominal retail sales have indicated, and deflationary pricing is helping keep receipts low for U.S. households. Going forward, retail sales should register further strength, and resilient consumers should never be counted out.

As for the economy, we believe we’ll see continued growth but recognize that there are critical potential “tipping points,” including foreign markets and wage growth.

MONTHLY ECONOMIC REVIEW: CONSUMERS ARE IN THE DRIVER’S SEAT

Posted on by Jack Kleinhenz

When it comes to the U.S. economy, one can’t help but feel a sense of déjà vu. Similar to last year, unseasonably cold weather and lingering caution among budget-conscious consumers have dampened economic activity since the first of the year. However, as we head into the second quarter, I expect we’ll see that the consumer is actually more in the driver’s seat compared to this time last year. Lower energy costs, rising home equity, job and income gains and increased buying power from the stronger U.S. dollar will all continue to positively contribute to greater consumer spending ability — a key factor for further economic gains.

Other positive factors that will continue to influence improved growth in consumer spending include growth in real disposable income, which has grown 4 percent on a year-over-year basis ending in February — the fastest rate seen in two years — and stock market gains that are about 12 percent above this time last year. Additionally, housing price appreciation and decreased household debt burdens are at their lowest in at least 35 years, contributing to bigger gains in consumer confidence.

Economic expansion in the United States is expected to continue, but the burden of carrying the world economy on its shoulders could be an obstacle on the path toward stronger U.S. gains.

This month’s full report includes these highlights:

Retail Sales

Retail sales (excluding automobiles, gasoline stations and restaurants) reversed course and increased 0.5 percent in March after dropping 0.4 percent in February.

Consumer Sentiment

The University of Michigan consumer sentiment index beat expectations in the first half of April, increasing to 95.9 from March’s average of 93.

Consumer Prices

The March headline Consumer Price Index rose 0.2 percent between March and February. This was the second positive reading in five months.

Gross Domestic Product

The third estimate of fourth-quarter GDP reflected no change to the 2.2 percent rate from the second estimate.

Housing

Single family starts rebounded by 4.4 percent to 618,000 units in March and homebuilding is off to a good start. Weather appeared to play a negative role earlier this year not only on starts but on completions.

Employment

Job growth slowed in March as private payrolls rose an anemic 129,000. Overall employment (public and private sectors combined) increased 126,000 in March.

Retail Jobs and Openings

Total retail employment across all industry segments increased 25,900 to 15.6 million in March. There were 463,000 job openings in the retail industry on the last business day of February.

Personal Income and Spending

Personal income rose by 0.4 percent in February while personal consumption inched up only 0.1 percent.

Chicago Fed National Activity Index

The economy was growing even slower last month according to the Chicago Fed National Activity Index which recorded activity dropped to -0.42 in March from -0.18 in February.

Download the full report (PDF)

THE GREATEST SURVEY YOU’VE NEVER HEARD OF

Posted on by Jack Kleinhenz

Have you ever heard of the ACS?  Well, don’t feel too bad. Most people haven’t heard of it either — and that could potentially be a big problem for retailers throughout the country.

ACS stands for the American Community Survey, a rolling survey conducted by the U.S. Census Bureau. It provides the nation’s only source of comparable, consistent and timely demographic and socioeconomic data and information on U.S. communities.

The ACS data helps instruct the allocation of federal, state and local government assistance and grants to the tune of $400 billion a year. And it’s used by various organizations, sectors and businesses — including and most importantly — retailers and merchants.

The survey provides a benchmark that supplements and supports retail-related data in a variety of ways, such as advertising, capital investment, distribution, hiring, marketing, merchandising and store and warehouse location selection.

The ACS powers the strategically important short-term and long-term business decisions of the nation’s retail industry and helps answers questions like:

  • Can this community support a full spectrum of retail outlets and merchandise?
  • Will we see effective return on investment from running an advertising campaign in this community?
  • Where should we locate a distribution center, store or warehouse?

The ACS helps both public and private organizations make informed decisions on the outlay of financial and fiscal resources. But all that could be put in jeopardy due to misinformed legislative action.

There are efforts afoot in Congress through the appropriations process to seriously defund, alter or repeal the survey. While some lawmakers’ concerns are justified, especially in regard to protecting privacy, any movement away from a fully-funded, annual ACS survey could do unreasonable and irrevocable harm to this important economic, government and retail resource.

Retailers and allies in the advertising, manufacturing and warehousing industries are working closely with policymakers to ensure that they understand the importance of this publicly available and data-rich survey.

MONTHLY ECONOMIC REVIEW: LINGERING WINTER CHILLS ECONOMY, STRONGER SPRING EXPECTED

Posted on by Jack Kleinhenz

he pattern of adverse cold weather and snowfall in a large swath of the United States looks very similar to last year. The weather is again at play and could well account for downward revisions to estimates for economic growth.

However, this year’s economic factors are substantially different and provide a stronger foundation for consumer spending in the months ahead. Job growth and openings have risen, energy prices have declined along with inflation, and wages and salaries are stronger. First quarter activity is soft, but the economy remains on firm tracks and is expected to pick up in the coming months.

This month’s full report includes these highlights:

Retail Sales

The outlook remains positive as households are benefiting from low gas prices, job gains and rising home prices.

Consumer Sentiment

Households cited weaker finances compared with last year. Nevertheless looking forward, the tightening of the job market should bring about stronger wage growth in the months ahead.

Consumer Prices

Core inflation is expected to be driven by the push and pull of import prices related to the stronger U.S. dollar along with wage and salary gains as slack in the labor market is reduced.

Gross Domestic Product

It is not clear what has caused the economy to slow but a number of factors could be at play. The composition of GDP, however, with the current revisions indicates a more positive outlook.

Housing

February home sales are the strongest since February 2008 and are well above expectations. The pace of January and February new home sales is in sharp contrast to the tepid sales registered in 2013 and 2014.

Employment

February’s payroll growth remained on solid footing with a gain of 288,000 jobs. Overall employment — public and private sectors combined — increased 295,000 in February.

Retail Jobs and Openings

The churn or turnover in the job market is another good sign of a strengthening job market as workers are becoming confident about job prospects.

Personal Income and Spending

The wage and salary component of income rose 0.6 percent after rising 0.1 percent in December. Wage growth is stronger, registering at nearly a 4.6 percent year-over-year rate for the same month a year earlier.

Chicago Fed National Activity Index

Further reduction in unemployment is needed to push inflation toward the Federal Reserve’s targeted levels.

MONTHLY ECONOMIC REVIEW: FEBRUARY 2015

Posted on by Jack Kleinhenz

In the February 2015 Monthly Economic Review, NRF Chief Economist Jack Kleinhenz provides in-depth analysis on the latest government economic indicators, such as wages and income change, retail sales and consumer sentiment. Additionally, the report looks at retail employment. Employment, according to NRF, which excludes automobiles, gas stations and restaurants, increased 34,800 in January to 2.76 million jobs seasonally adjusted, a gain of 215,600 from the same month last year. Total retail employment across all industry segments increased 45,900 to 15.6 million in January.

NRF’s Monthly Economic Review is a report for NRF and its communities’ members that includes the latest information on industry sales, providing a thorough overview of the current retail and economic climate.

Prepared by NRF chief economist Jack Kleinhenz, the report utilizes recent economic data to analyze the impact of key indicators such as energy costs and the housing market on retail sales growth.

MONTHLY ECONOMIC REVIEW: DECEMBER 2014

Posted on by Jack Kleinhenz

National Retail Federation

In the December 2014 Monthly Economic Review, NRF Chief Economist Jack Kleinhenz provides in-depth analysis on the latest government economic indicators, such as wages and income change, retail sales and consumer sentiment. Additionally, this members-only report features the latest data on the notable growth in Gross Domestic Product: The economy expanded at an annual rate of 5 percent in the third quarter, according to the Bureau of Economic Analysis’ third estimate. This was the first time since 2003 that economic activity exceeded 4 percent in two consecutive quarters.

NRF’s Monthly Economic Review is a report for NRF and its communities’ members that includes the latest information on industry sales, providing a thorough overview of the current retail and economic climate.

Prepared by NRF chief economist Jack Kleinhenz, the report utilizes recent economic data to analyze the impact of key indicators such as energy costs and the housing market on retail sales growth.

MONTHLY ECONOMIC REVIEW: NOVEMBER 2014

Posted on by Jack Kleinhenz

National Retail Federation

NRF Chief Economist Jack Kleinhenz implores retailers and merchants to fill out government-sponsored economic and labor surveys in an effort to better refine the retail industry’s analysis and forecasting. “To provide you with good analysis and forecasting, we need good data. And that starts with you,” Kleinhenz says. Read the article.

NRF’s Monthly Economic Review is a report for NRF and its communities’ members that includes the latest information on industry sales, providing a thorough overview of the current retail and economic climate.

Prepared by NRF chief economist Jack Kleinhenz, the report utilizes recent economic data to analyze the impact of key indicators such as energy costs and the housing market on retail sales growth.