Retail

Retail sales inched up 1.2 percent in July as Americans loaded up on electronics

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Families preparing for a virtual school year powered sales of laptops, webcams, headphones and other electronics by 23 percent

Sales of big-ticket items like cars fell in July, as cash-strapped Americans pulled back on many categories of spending.
Sales of big-ticket items like cars fell in July, as cash-strapped Americans pulled back on many categories of spending. (David Zalubowski/AP)
By

August 14, 2020

Retail sales grew a disappointing 1.2 percent in July, following two months of sharp gains, raising worries about a renewed wave of economic pain as enhanced unemployment benefits expire for millions of Americans.

Consumers pulled back on big-ticket items like cars, building materials and sporting goods in July, but spent more on food, gasoline, and health and beauty products, according to numbers released Friday by the U.S. Commerce Department. Spending increases were generally modest, with one exception: Electronics and appliance stores saw a 23 percent increase from June as families stocked up on laptops, headphones and webcams to prepare for a virtual start to the school year in many parts of the country.

“Gains were extremely uneven,” Diane Swonk, chief economist at Grant Thornton, wrote in a note to clients. “Retail sales showed signs of slowing in July, which underscores our concern that the rebound is losing momentum.”

Overall consumer spending inched up to $536 billion, from $529.4 billion in June.

The uptick follows two months of surprise growth — retail sales surged a record 18.2. percent in May, and 8.4 percent in June — after steep drop-offs the previous two months. Retail sales fell 8.3 percent in March and 14.7 percent in April.

The pandemic has plunged the nation into the worst economic crisis since the Great Depression. And though there are signs that the wealthy have recovered, economists say it probably will take years for the rebound to reach most Americans. More than 30 million people are collecting unemployment benefits, with Black and Hispanic families among those who have been hardest hit by the crisis.

A federal boost to unemployment benefits, which provided an additional $600 a week to jobless Americans, expired at the end of July, leaving millions of households struggling to make ends meet. Lawmakers have yet to agree on what the next stimulus package would include, or when it might take effect. Meanwhile, more than 100,000 small businesses have already permanently closed, and many others have furloughed or laid off huge swaths of their workforce.

“While households are spending, they are anxious about their health and economic well-being, so they are being pragmatic,” said Jack Kleinhenz, chief economist for the National Retail Federation, an industry trade group. “We have to remember that there’s uncertainty about economic policy and that the resurgence of the virus is putting pressure on the fledgling recovery.”

More than 5.2 million novel coronavirus cases have been recorded since the pandemic began in the United States. More than 164,000 Americans have died, including nearly 1,500 deaths recorded Wednesday — the largest single-day count since mid-May.

Analysts say consumer spending patterns have shifted during the pandemic, as more shoppers buy online and rethink their purchases of discretionary goods like apparel, handbags and jewelry. At least a dozen major retailers — most of them mall-based chains or department stores — have filed for bankruptcy since April. Grocery stores, meanwhile, are doing brisk business as Americans increasingly do their dining at home.

Apparel retailers, which typically get a big boost from the back-to-school surge, have seen demand drop in many parts of the country, as parents hold off on buying new clothes and shoes for their children.

“Where shoppers elected to spend their money remains very uneven,” said Neil Saunders, managing director of GlobalData Retail. “While online apparel is performing very well, visits to clothing shops, especially those located in malls, are extremely suppressed. Impulse buys are down and spending on certain categories, like workwear, has all but been wiped out.”

Vehicle sales, which surged earlier in the summer as Americans bought used cars, dipped 1.2 percent in July. Furniture sales remained flat from June, while spending at building materials and garden stores fell 2.9 percent and dropped 5 percent at sporting goods and hobby stores.

The coming months will be crucial for retailers, analysts say, as they try to make up lost ground during the back-to-school and holiday shopping seasons, which are typically the two largest sales periods of the year.

“A lot is up in the air right now — is school going to be virtual, is it physical, is it a hybrid of the two?” said Marie Driscoll, a managing director at Coresight Research, a retail advisory firm that is predicting that back-to-school sales will slump by as much as 11 percent this year. “Not knowing the answers to those questions makes it hard for both consumers and retailers.”

The Washington Post

July Increase in Retail Sales Continues Recovery from Coronavirus Pandemic

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WASHINGTON–(BUSINESS WIRE)–Retail sales continued to recover from the impact of the coronavirus pandemic in July, growing more slowly than the month before but adding to the strong turnaround seen since this spring’s declines, the National Retail Federation said today.

“Retail sales for July were another positive step in the right direction as our economy continues to slowly reopen”

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“Retail sales for July were another positive step in the right direction as our economy continues to slowly reopen,” NRF President and CEO Matthew Shay said. “Americans are showing their continued resilience and willingness to spend in the face of this unprecedented pandemic and government actions to date have clearly supported consumers and the economy in this process. Retailers all across the country have demonstrated that their stores and supply chains can be operated safely and effectively for associates and their customers by following established guidelines and protocols. We encourage Congress and elected leaders at all levels of government to enact policies that support consumers and keep the economy open.”

“Retail sales are starting the third quarter on a solid footing considering the nosedive we saw this spring, but we have to remember that there’s uncertainty about economic policy and that the resurgence of the virus is putting pressure on the fledgling recovery,” NRF Chief Economist Jack Kleinhenz said. “While households are spending, they are anxious about their health and economic well-being, so they are being pragmatic. The amount of uncertainty about forecasting is huge as we look toward the second half of the year, and what happens with the economy comes down to what the coronavirus allows us to do.”

The U.S. Census Bureau said today that overall retail sales during July were up 1.2 percent seasonally adjusted from June and up 2.7 percent year-over-year. That follows an 8.4 percent month-over-month increase in June. Retail sales have been climbing after a record monthly drop while most stores were closed in April.

NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants in order to focus on core retail – showed July was up 1 percent seasonally adjusted from June and up 10 percent unadjusted year-over-year. NRF’s results are different from the Census Bureau’s figures because of the categories excluded by NRF.

The July numbers were part of a strong trend: NRF’s numbers were up 7.1 percent unadjusted year-over-year on a three-month moving average and up 4.7 percent for the first seven months of the year.

Just over half of retail categories saw month-over-month gains and three-quarters saw year-over-year increases. The biggest monthly gain came at electronics and appliance stores, which are selling more computers for home offices and online learning because of expected school closings, along with more appliances associated with home improvement spending and higher home sales.

Specifics from key retail sectors during July include:

  • Electronics and appliance stores were up 22.9 percent month-over-month seasonally adjusted but down 2.3 percent unadjusted year-over-year.
  • Clothing and clothing accessory stores were up 5.7 percent month-over-month seasonally adjusted but down 19.6 percent unadjusted year-over-year.
  • Health and personal care stores were up 3.6 percent month-over-month seasonally adjusted and up 3.1 percent unadjusted year-over-year.
  • Online and other non-store sales were up 0.7 percent month-over-month seasonally adjusted and up 25.8 percent unadjusted year-over-year.
  • Grocery and beverage stores were up 0.2 percent month-over-month seasonally adjusted and up 12.8 percent unadjusted year-over-year.
  • Furniture and home furnishings stores were unchanged percent month-over-month seasonally adjusted but up 0.5 percent unadjusted year-over-year.
  • General merchandise stores were down 0.2 percent month-over-month seasonally adjusted but up 3.1 percent unadjusted year-over-year.
  • Building materials and garden supply stores were down 2.9 percent month-over-month seasonally adjusted but up 16 percent unadjusted year-over-year.
  • Sporting goods stores were down 5 percent month-over-month seasonally adjusted but up 18.9 percent unadjusted year-over-year.

About NRF

The National Retail Federation, the world’s largest retail trade association, passionately advocates for the people, brands, policies and ideas that help retail thrive. From its headquarters in Washington, D.C., NRF empowers the industry that powers the economy. Retail is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs — 52 million working Americans. For over a century, NRF has been a voice for every retailer and every retail job, educating, inspiring and communicating the powerful impact retail has on local communities and global economies.

4 ways this year’s holiday shopping may be affected by the pandemic, according to a retail economist

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Inc. Business Insider, August 1, 2020

  • As the holiday season slowly approaches, it’s difficult to say for sure how the COVID-19 pandemic will affect shopping.
  • Jack Kleinhenz, chief economist for trade group the National Retail Federation, estimates that four main trends will emerge in the retail industry this fall and winter.
  • He says some consumers may not have generous shopping budgets this year, as many are struggling with unemployment and other financial burdens.
  • Kleinhenz also says brick and mortar stores will likely need to hire more staff to accommodate curbside pickup and delivery requests, and may offer more products catered to the ‘stay-at-home’ lifestyle.
  • Visit Business Insider’s homepage for more stories.

While Black Friday is still months away, a few predictions are safe to make now. Chief among them: For many households, consumers will be spending for the holidays no matter what.

“There’s always room somehow to find [the budget] for either Christmas or Hanukkah or for the holidays. But it will be a challenging one,” said Jack Kleinhenz, chief economist for the National Retail Federation, a trade group.

Here are four other trends you can expect to see this coming holiday season, according to Kleinhenz.

1. In-and-out floor plans

Optimize your store layout for a quick in-and-out visit. Adapting to consumers’ changing shopping habits is more important than ever. When shoppers venture into stores, they’re on a mission.

Brick-and-mortar stores need to convince shoppers that it is healthy and safe to come in. Have staff readily available to quickly point customers in the right direction.

2. Extra shopping help

You may want to hire plenty of shopping assistants, those employees who run through the store to get items people want for curbside pickup or delivery. Staff up early since competition for this help could be stiff. The hiring surge could be so significant that it could affect temporary employment statistics in the fourth quarter, says Kleinhenz.

3. More for the homebody, less for parties

People will want to buy products that align with social distancing lifestyles, even continuing into November. Kleinhenz expects a big uptick in the home entertainment category, such as remote-learning tools like iPads and laptops, and in other gifts that reflect stay-in-place routines.

In contrast, food spending will be down if people can’t gather for big meals, Kleinhenz predicts. The fewer dollars going to big fancy meals or traveling may mean more going toward gifts, he says.

4. More returns

Prepare for more returns than usual. If customers do buy online, they’ll likely buy more than what they need since they can’t go into the store to try things on or see the product in real life, eventually returning a lot of those items. Plus, you likely have additional sanitization processes to think about. Be prepared to handle those returns in a timely way.

Don’t count the consumer out this holiday shopping season, Kleinhenz says. He still has faith in consumers, all things considered, and that they’ll want to spend money this year, even if their buying patterns look different than last year. It’s up to you to meet those consumers where they are.

Anna Meyer,

Inc 
Aug 1, 2020

More Temporary Coronavirus Business Closures Turning Permanent, Yelp Reports

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KEY POINTS

  • Only 24% of the businesses that were closed in April had reopened by July 10
  • Permanent closures now account for 55% of all closures
  • Of the 26,160 restaurants and bars that were closed in July, 15,770 plan to stay that way permanently

A Yelp analysis indicated Wednesday fewer businesses are closing temporarily as a result of the coronavirus pandemic, but permanent closures are growing. At the same time, data indicated the number of COVID-19 cases increased as consumer interest in restaurants, bars, nightlife and health clubs rose.

U.S. cases of coronavirus began surging as states lifted restrictions imposed in the early days of the coronavirus pandemic, especially in the South and West where instances initially were low in the spring and restrictions were lifted rapidly.

The U.S. has recorded nearly 3.9 million coronavirus infections and nearly 142,000 deaths from COVID-19. Nearly 58,000 new cases were reported Tuesday along with more than 470 deaths.

Yelp reported in April 175,000 businesses had closed because of pandemic lockdowns. As of July 10, that number fell to 132,000, indicating only 24% of those businesses had reopened. And although temporary closures are falling, permanent closures are growing, accounting for 55% of all closures since March 1.

Of the 26,160 closed restaurants and bars in July, 15,770 have closed permanently.

Among retail businesses, 29% of the 26,119 closures are permanent.

“How durable the improvement in retail spending will be is directly related to how widespread the resurgence in COVID-19 cases becomes,” NRF chief economist Jack Kleinhenz said in a press release. “All eyes are on the infections that are accelerating in many parts of the country and they pose a serious threat to recovery.”

Retail sales for June were up 7.5% compared to 18.2% in May, the Census Bureau reported. Restaurant and bar sales for June totaled $47.4 billion, $18 billion under prepandemic levels, the National Restaurant Association reported.

Yelp data indicated the 10 states with the largest increases in COVID-19 cases in June and significant increases in consumer interest in restaurants, bars and nightlife, and gyms were Florida, Idaho, Nevada, Oklahoma, South Carolina, Arizona, Texas, Georgia, Kansas and Alabama.

Massachusetts, Michigan, the District of Columbia, New York, Connecticut, Maryland, New Hampshire, Rhode Island, Virginia and Illinois not only had the largest decreases in COVID-19 cases but showed flat interest in restaurants, bars, nightlife and health clubs.

Yelp said there also has been a shift in consumer trends since May. Interest in alcohol-related activities is up while grocery interest is down. Formal wear and bridal shops also saw growing interest, as is axe throwing, escape games and boxing.

Additionally, there is growing consumer interest in urgent care and emergency rooms.

International Business Times

July retail market: US sales jump 7.5% in June; bankruptcies hit 3-year high

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U.S. retail sales rose more than expected for the second consecutive month in June as the economy reopened, but experts say recovery remains uncertain given the new spikes in COVID-19 cases.

Retail and food services sales jumped 7.5% during the month, surpassing the consensus estimate of economists polled by Econoday of a 5.2% rise.

“June’s numbers show that retail spending is fueling the economic recovery,” Jack Kleinhenz, chief economist at the National Retail Federation, or NRF, said in a statement. “How durable the improvement in retail spending will be is directly related to how widespread the resurgence in COVID-19 cases becomes.”

Meanwhile, nine retailers went bankrupt in late June through mid-July period, including vitamin seller GNC Holdings Inc. and retailer RTW Retailwinds Inc. The year-to-date bankruptcy count has already surpassed the number of filings in 2019 and 2018, according to an S&P Global Market Intelligence analysis.

Retail sales

U.S. retail and food services sales increased in June over the prior month to a seasonally adjusted $524.31 billion, according to a report released July 16 by the U.S. Census Bureau. This follows a revised 18.2% rise in May.

Several U.S. states, especially those in the Southeast and West, began reporting spikes in COVID-19 cases in June. The resurgence has prompted several states to either pause their reopening plans or shutter certain businesses.

The increase in retail sales in June “solidified the recovery that started in May and confirmed the strong — though uneven — snapback in demand,” Lydia Boussour, senior U.S. economist at Oxford Economics, said in a note. “Sadly, the alarming trajectory of the virus nationwide has put in question the sustainability of the recovery in consumption.”

NRF President and CEO Matthew Shay said the sales figures are encouraging and “reflect continued progress in the right direction.”

The jump in retail sales was driven by clothing and clothing accessories store sales, which rose 105.1% from May to $17.1 billion in June. Spending at electronics and appliance stores increased by 37.4% during the month to $7.05 billion.

Furniture and home furniture stores registered an increase of 32.5% in sales to $9.58 billion. Sales at gasoline stations rose 15.3% month on month to $33.63 billion, while spending on food services and drinking places jumped 20% to $47.43 billion.

“[W]hile today’s report gives the illusion of a fearless consumer spending lavishly, the reality is more sobering: consumers are increasingly fearful amid new spikes in COVID-19 cases and a looming fiscal cliff,” Oxford Economics’ Boussour said.

Meanwhile, nonstore sales, the category that includes e-commerce, decreased 2.4% to $82.80 billion in June. But on a year-on-year basis, online spending rose 23.5%.

“We do expect online sales to continue their extraordinary upward swing as consumers get comfortable adding more product categories on their online shopping list,” Moody’s Vice President Mickey Chadha said in a note.

Marwan Forzley, CEO of global payments firm Veem, said the “modest” monthly decline in online spending does not come as a surprise. “We are living in very volatile times with heightened uncertainty, which is bound to make some consumers cautious when it comes to spending money,” he told Market Intelligence via email.

Forzley added that the coronavirus crisis has changed the mindset of online spending. “Spending now starts online and is complemented offline as opposed to the pre-COVID mindset of starting the buying process offline first. I think that mindset shift will continue to fuel the relevance of e-commerce, online payments, supply chain payments and global payments at large,” he said.

The U.S. Labor Department separately said Thursday that unemployment claims in the U.S. declined to 1.30 million in the week ended July 11 from 1.31 million in the previous week.

Matthew Eidinger, fintech specialist at Cambridge Global Payments said in a note that the data on both consumer spending and the U.S. labor market should be “taken with a grain of salt,” as the rise in the coronavirus cases stands to threaten state reopening efforts across the entire Southern belt.

“Efforts to rollback economic reopenings could mean a loss of the momentum the economy has built up throughout May and June — prompting another wave of business closures and corresponding layoffs, which could threaten the recovery,” Eidinger said.

Consumer prices

The Consumer Price Index, or CPI, rose 0.6% in June from the previous month, data released July 14 by the U.S. Bureau of Labor Statistics showed.

Prices advanced 0.6% year on year.

The core CPI, which excludes food and energy prices, increased 0.2% in June, registering its first monthly rise since February. Food prices rose 0.6% month on month, while energy prices increased 5.1% during the month.

Prices for apparel increased by 1.7% in June versus the prior month. Prices for men’s and boys’ apparel rose by a seasonally adjusted 2.4%, while prices for women’s and girls’ apparel rose by 0.9%.

Bankruptcy

Nine Market Intelligence-covered U.S. retail companies went bankrupt in late June and early July, bringing total year-to-date bankruptcies to 38.

The year-to-date figure now outnumbers the total number of bankruptcies in 2019 and 2018. In 2019, 32 retailers went bankrupt, while 2018 saw 33 companies going bankrupt.

The analysis includes companies with a primary industry classification of retailing, household and personal products, or consumer durables and apparel, and a secondary classification of retailing. Public companies included in the list of companies with public debt must have at least $2 million in either assets or liabilities at the time of the bankruptcy filing. In comparison, private companies must include at least $10 million.

GNC Holdings filed a voluntary petition for reorganization under Chapter 11 on June 23. At the time of filing, GNC said it is pursuing a dual-path process that will allow the company to restructure its balance sheet via a stand-alone plan of reorganization or a sale of the company.

RTW Retailwinds, which owns apparel retailer New York & Co., filed a voluntary petition for reorganization under Chapter 11 on July 13 with plans to close most, if not all, of its stores. The company has launched the liquidation process and is evaluating strategic options, including the possible sale of its e-commerce business and related intellectual property.

Last month, RTW Retailwinds ranked 14th out of the 15 retail companies with the highest odds of defaulting within a year, according to Market Intelligence’s fundamental probably of default model.

Apparel brand Brooks Brothers Group Inc., founded in 1818, filed for bankruptcy July 8. The company listed both its assets and liabilities in the range of $500 million to $1 billion. A venture between mall owner Simon Property Group Inc. and apparel licensing firm Authentic Brands Group LLC will provide $80 million in bankruptcy financing to Brooks Brothers, according to The Wall Street Journal.

BHS Foodservice Solutions, which sells restaurant equipment and supplies, on June 26 filed a voluntary petition for liquidation under Chapter 7.

Other companies that filed for Chapter 11 bankruptcy in the period leading up to July 16 include home decor retailer Old Time Pottery Inc.; clothing retailer Lucky Brand LLC; Muji U.S.A. Ltd., which sells clothing, household goods and food items; and Sur La Table Inc., which operates a chain of stores that sell cookware, cutlery, dinnerware and other products.

Employment

The retail sector in June gained about 740,000 jobs, a 5.42% month-on-month increase, to 14.4 million jobs, according to a July 2 monthly report from the U.S. Bureau of Labor Statistics.

Employment at clothing and clothing accessories stores increased 35.64% in June to 767,200 jobs. These stores gained 201,600 jobs during the month.

Furniture and home furnishings retailers added 84,200 jobs, up 28.30% from the previous month to 381,700.

Sporting goods, hobby, books and music stores registered an increase of 17.84%, or 65,500 jobs during the month to 432,700 total. General merchandise stores added 108,100 jobs, a month-on-month increase of 3.66%.

Vulnerability

A July analysis of the one-year probability of default scores identified 15 public retailers with scores ranging from 32.2% to 11.8% and corresponding implied credit scores of “ccc-” to “ccc+.”

The calculated one-year probability of default remained unchanged for all of the companies on the list except Merion Inc. and Twinlab Consolidated Holdings Inc.

Merion, which provides health supplements and personal care products, saw its one-year probability of default rise to 32.2% from 31.2% in June. The probability of default for Twinlab Consolidated Holdings increased to 24.7% from 24.2% the prior month.

All the retailers on the list held on to their spots, but Trans World Entertainment Corp. moved up one place to No. 14 after RTW Retailwinds filed for bankruptcy. This change also introduced a new company to the list: Kirkland’s Inc., a specialty retailer.

Kirkland’s on June 4 reported a pretax loss of $27.7 million for its first quarter as the coronavirus pandemic affected sales.

S&P Global’s Fundamental Probability of Default Model provides a fundamentals-based view of credit risk for corporations by assessing both business risk — including country risk, industry risk, macroeconomic risk, company competitiveness and company management — as well as financial risk, such as liquidity, profitability, efficiency, debt service capacity and leverage. For a more thorough review of the model, see the PD Model Fundamentals – Public Corporates white paper.
S&P Global

 

NABE economists see US reopening in mid-2020 but with uneven recovery

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NEW YORK (ICIS)–US economists featured by the National Association for Business Economics (NABE) see the US economy opening up largely by mid-year but with an uneven recovery through 2020.

“My belief is that the severe contraction continues not only in the second quarter but in the third quarter, with a gradual upturn in the fourth quarter,” said Jack Kleinhenz, chief economist of the National Retail Federation.

“I see more of a rolling recovery, like a rolling recession. It will take opening of different parts of the economy at a different pace and different time,” he added.

Kleinhenz and other economists spoke on the 13 April US Macroeconomic Update and Outlook Webinar hosted by the NABE.

On 29 March, the US extended its nationwide social distancing guidelines through the end of April. Non-essential workplaces remain closed.

“In terms of when the economy can reopen, as economists we should pay more attention to the epidemiologists because it will be difficult to reopen broadly unless we have testing, perhaps antibody testing to understand where the virus is under control and where it isn’t,” said Sara Rutledge, managing director at StratoDem Analytics.

“The most likely scenario is that it will take 12-18 months before we have something akin to a vaccine that would allow a return to normalcy… In general, I think we could see some movement to that direction in the second half of the year,” she added.

While the US economy may reopen, it will largely be an uneven recovery, with regional and end market variances.

“I think the economy will be allowed to reopen after Memorial Day (25 May). That does not mean all things are going to reopen. I think large parts of the economy are going to remain shut down simply because of lack of demand,” said Robert Fry, chief economist of Robert Fry Economics LLC.

“People are not going to go on cruises, they’re not going to fly unless it’s absolutely necessary. I think a lot of people are still going to hesitate about going out to restaurants and especially movie theaters and other theaters,” the former DuPont economist added.

Chris Varvares, co-head of US economics at IHS Markit, also sees a post-Memorial Day reopening as reasonable, but noted concerns about consumer behaviour.

“It’s not clear what will happen with consumers – that’s totally an unknown at this point. Remember after 9/11 it took two years for air passenger miles to get back to the prior peak… Every flight could have the coronavirus on it so that’s likely to keep air travel pretty suppressed for quite some time,” said Varvares.

In the NABE’s April 2020 Flash Outlook Survey, economists see US GDP of -26.5% in the second quarter, followed by a 2.0% gain in the third quarter and a 5.8% increase in the fourth quarter.

Focus article by Joseph Chang

International Commodity Intelligence Services

American consumers, once bulwark of economy, are rapidly losing confidence

Posted on by katiecmorgan
    • By Don Lee Los Angeles Times (TNS)

Updated 

In another warning sign of how hard the coronavirus crisis may punish the U.S. economy, American consumer confidence in March saw its sharpest drop since the Great Recession in 2008.

Until now, relatively high levels of confidence have consistently buoyed personal spending and the economy as a whole because 70% of total U.S. economic output, or gross domestic product, is tied directly to consumer spending.

Richard Curtin, director of the University of Michigan’s closely followed confidence survey, said the findings may significantly understate the reversal underway because most of its interviews were conducted before lockdowns and physical distancing were widely ordered in mid-March. The survey was released Friday.

Anecdotal reports indicate online sales are also up sharply at many firms.

And House passage Friday of the roughly $2-trillion stimulus plan is expected to help lift consumer sentiments and spending, as well as the broader economy — at least for the immediate future.

The package includes direct payments of $1,200 to most individual taxpayers as well as a wide range of spending to boost unemployment compensation and to help keep people from getting laid off.

“If we could replace some of the lost income, that’ll provide a backstop for people to at least feel they have spending power when they need it,” said Jack Kleinhenz, chief economist at the National Retail Federation, a trade group.

President Trump has been eager to lift restrictions that have kept millions of Americans hunkered down in their homes, and he has repeatedly predicted a sharp economic turnaround due to pent-up demand.

“I think we are going to have a tremendous rebound,” he said Friday before signing the $2-trillion bailout bill.

But many economists agree that the recovery is likely to be slow, not the quick snap back that Trump suggests.

“Will we have lingering issues that will mute some of the recovery? Yes,” said Shawn DuBravac, an economist who specializes in consumer electronics.

One big reason is uncertainty over the spread of the COVID-19 disease and the many months likely to be needed to produce a vaccine for widespread distribution.

Another reason for analysts’ concern is that many businesses and households have lost incomes and earnings, and the plunge in stocks has hammered people’s retirement finances, as well as their feelings of security.

The Dow on Friday ended a three-day rally by falling 915 and is now down 27% from its mid-February high.

The University of Michigan survey showed a sharp negative turn in people’s attitudes not just about current conditions but also future expectations for the economy and their personal financial situation.

Curtin said the latest survey data suggest that the economy has already entered a recession and that “the economic downturn could persist at least until the end of the year.”

The index saw an 11.9 percentage point drop, compared to the 12.7 point drop during the Great Recession.

“Perhaps the most important takeaway is that the largest proportion of consumers in nearly 10 years anticipated that the national unemployment rate will increase in the year ahead,” Curtin said.

Curtin said Friday that he doubts the economy will bounce back quickly after the worst of the pandemic passes.

Some spending will rise as people replace broken appliances and vehicles, but overall spending will “seriously diminish,” he said.

Even if consumers feel comfortable going out to shop again in physical stores, Curtin thinks many will put off big discretionary spending and instead save more money because of uncertainties.

“It’s an issue of their finances,” Curtin said. “Most households wish they had more cash on hand, and that’s going to continue in the next several months.”

On the bright side, consumers are spending substantially more at supermarkets and drug stores as well as other sellers of personal goods. And many Americans are buying more online than before.

Garrett Breton, president of Comfort One Shoes, which operates 16 stores in Maryland, Virginia and Washington, D.C., said his company had the best-ever sales online on Wednesday — up 140% compared with the same day a year ago. Some of the biggest increase has been in running shoes.

“I think what people are doing and able to do right now is to take walks with their families, go running and exercise outside,” Breton said.

He also sees a silver lining for future online sales in that many people who had never shopped over the internet are doing so now — and will probably continue after the health crisis ebbs.

Nationwide, online sales were growing even before the virus outbreak. In the fourth quarter, e-commerce sellers sold $158 billion worth of goods, accounting for 11.4% of total retail sales, the highest on record, according to Commerce Department data.

But at Comfort One Shoes, online sales make up about 18% of the company’s revenue. And Breton said the company could have trouble stocking merchandise in the coming months as most of his shoes are imported from Europe, which almost certainly will fall into a deeper recession than the United States.

Breton expects all of his stores to stay closed for another two weeks, and then for business to come back gradually.

“It’s going to be a slow climb out,” he said.

Tinier tax refunds hurt ritzy shops more than discounters

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Lower, slower income tax refunds that have dragged on retail sales this year are disproportionately hurting upscale stores, since high-income shoppers are more likely to get an unexpected bill from the Internal Revenue Service under changes backed by President Trump and congressional Republicans.

February revenue at U.S. retailers fell 0.2 percent from the month before to $506 billion, the Census Bureau said Monday, and merchants placed much of the blame on cold weather, stock market fluctuations, and shrinking refunds after a GOP-led tax overhaul that eliminated or cut many of the deductions once claimed by people earning $100,000 a year or more.

Those changes, and Treasury Department efforts to buoy take-home pay through adjustments to withholding tables, left some taxpayers getting little to no money back from the IRS and often having to make surprise payments.

The total number of payouts issued so far this year is down 2.6 percent from the same period in 2018, according to IRS data, and the amount has dropped 2.9 percent to $191.9 billion. The refunds have already become a talking point in the 2020 presidential race, and a CNN poll last year showed the tax bill — which granted a large break to businesses — dragged on Republicans in the 2018 midterms when voters gave Democrats a majority in the House of Representatives.

“We see the most risk to households in the upper-income demographics, particularly those that live on the coasts, as they likely get impacted” by limits on state and local tax deductions, said Michael Lasser, an analyst with Swiss lender UBS. That weighs on retailers such as Restoration Hardware and Williams-Sonoma, while leaving discount stores such as Walmart unfazed, he said.

It’s “something that we’re watching closely,” Jack Preston, senior vice president for finance at Corte Madera, Calif.-based Restoration Hardware, told investors and analysts last week. “We’ve heard anecdotes of people being surprised with the tax bills as they prepare their tax returns.”

Overall, however, store owners remain optimistic about the rest of 2019, according to the National Retail Federation, which represents businesses contributing $2.6 trillion a year to the U.S. economy. The group’s chief economist, Jack Kleinhenz, noted that original estimates for January sales were revised upward and that online merchants saw gains compared with both the previous month and February 2018.

“The consumer has not forsaken the economy as some previously claimed,” he said in a statement. “We still expect growth to pick up, fueled by strong fundamentals like job and wage growth.”

The jobless rate remained at 3.8 percent in February, near a 50-year low, and average hourly pay grew 3.4 percent to $27.66, according to the Bureau of Labor Statistics.

by James Langford
 | April 01, 2019
Washington Examiner

Booming jobs market is leaving the retail industry behind

Posted on by katiecmorgan
  • Despite strength in jobs from manufacturing to medicine, retail is one of just two sectors that have lost jobs over the last few years.
  • Since January 2017, retail has lost more than 140,000 jobs; the sector added to those losses in March 2019, according to Labor Department data.
  • “Retail is a sector where automation has been particularly present,” said PGIM’s Nathan Sheets. “U.S. consumers have manifest over many years that they want low prices, even if that means less help from workers on the floor.”

Though many American industries have ramped up hiring in recent years amid a strong economy and easier regulations under President Donald Trump, one sector in particular has lagged the rest: retail.

Since January 2017, retail has lost more than 140,000 jobs; the sector added to that in March 2019 with a loss of more than 11,000, according to Labor Department data. The sector is one of just two industries that have lost jobs over the last few years, according to data tracked by CNBC.

For example, an aging baby boomer population has fueled employment in the health-care industry, while the post-crisis business sector has supported the addition of tens of thousands of jobs per month. The government’s Friday report on the employment situation showed the health care sector alone added 61,000 jobs in March, while the business industry tacked on another 37,000.

Despite strength in jobs from manufacturing to medicine, retail is one of just two sectors that have lost jobs over the last few years. Since January 2017, retail has lost more than 140,000 jobs; the sector added to those losses in March 2019 with a loss of more than 11,000, according to Labor Department data.

The lukewarm performance in the retail sector have come despite a broader economic groundswell, with Trump’s corporate tax cuts giving businesses a balance sheet boost, goosing GDP growth above the rate many economists feel is sustainable.

The utilities sector, the only other to have seen a net decline in jobs since 2016, employs less than 1 million people. Retail employs more than 15 million.

Automation effect

Theories on the employment softness range from analyst to analyst, most agree that the downtick in the number of people working at big-box retail locations has to do with the rise of e-commerce and technology.

“Broadly speaking, retail is a sector where automation has been particularly present. Self-checkouts are now common. If you’re not sure about a price, you scan the bar code rather than asking a worker,” Nathan Sheets, chief economist at PGIM Fixed Income.

As an example the thriving shift toward automation at retailers nationwide, Walmart announced earlier this year that it is expanding its “Scan & Go” technology to an additional 100 locations across the U.S. For consumer staples like groceries that customers still don’t feel comfortable purchasing online, Kroger’s new “Scan, Bag, Go” platform will allow shoppers to scan their items themselves and allow the chain to cut cashiers at 400 locations.

Gap, Victoria’s Secret, J.C. Penney, Tesla and Abercrombie & Fitch have all announced that they’ll be closing locations in 2019; 4,810 store closures had been announced by retailers by March 2019, according to Coresight Research.

The push toward automation checkouts comes as major retailers and supermarkets come under pressure to generate even more profit out of a razor-thin margin business while offering customers a unique shopping experience.

“As a related point, the ongoing shift in retail from bricks and mortar to online very much reinforces this trend. For online sales, you largely eliminate customer-facing employment,” Sheets added. “U.S. consumers have manifest over many years that they want low prices, even if that means less help from workers on the floor.”

Perhaps emblematic of the struggles of some retailers to keep up in the modern era, the October bankruptcy filing of Sears Holdings represented for many economists a key moment in the shift toward a leaner business model.

Others, like National Retail Federation chief economist Jack Kleinhenz suggested that the government data may not suggest a decline in retail business, but rather a shift in the types of people they employ.

“You could now have a major retailer that owns a warehousing and distribution center, and products never go through a store,” Kleinhenz said. “There has been improvement in productivity and the use of technology. I caution us to be unnerved by these numbers at this point in time.”

“The retail industry is actually in sync with the economy and is growing at a pace that is appropriate, but we have to broaden our scope” of how we measure it, he added.

Instead of employees lining up at brick-and-mortar store locations, the rise of e-commerce is driving demand for transportation and warehousing staff. A current driver shortage beleaguers the trucking industry thanks to a combination of low compensation, burdensome schedules and conditions of the job.

But amid a new generation of consumers accustomed to smartphone shopping and two-day shipping, retail demand for storage square footage is soaring. Some savvy investors, such as Blackstone’s Jonathan Gray, have actually poured money into the warehousing business in an effort to preempt the broader trend and capitalize off the scaling need for space.

Gray told CNBC in July that the firm had purchased more than 550 million square feet of warehousing since 2010.

“As you think about investing, you’re trying to think about sort of where the puck’s going to, what’s happening. We came to a simple view that online sales were going to grow,” Gray said from the Delivering Alpha Conference in New York in 2018. “As a result, we’ve seen this pickup in demand for warehouse space, which traditionally was a pretty boring business.”

“In an environment where it’s hard to invest, finding things you have high conviction in, where you think there’s going to be growth – that’s a pretty good strategy,” he added.

Thomas Franck
CNBC

Retail Industry Employment Dropped Again in March

Posted on by katiecmorgan

According to numbers released last week by the Department of Labor, retail is one of the few industries losing jobs in a generally stable economic climate.

Retail employment in March was down by 11,700 jobs, seasonally adjusted from February, and down 47,400 jobs unadjusted year-over-year. The United States saw a monthly gain of 196,000 jobs overall (across all industries) in March.

National Retail Federation (NRF) chief economist Jack Kleinhenz, for one, said the numbers don’t paint an accurate picture of the industry. In a statement from the NRF, the economist said the overall growth in employment “paints a picture of resiliency of the U.S. economy” and that “consumer confidence and consumer spending were down earlier in the year, so the retail numbers likely reflect merchants’ hesitancy to add to payrolls under those conditions.”

That may be, but it’s notable that retail has posted job losses for three solid months: Since January 2017, the industry has lost more than 140,000 jobs (including 18,500 jobs in February), according to the Department of Labor.

A confluence of factors is impacting retail’s job growth, say industry watchers. Among them is the downsizing of retail—led by the continued closing of big box and department stores—and an increase in automation, which may be shifting retail’s jobs away from stores and into technology and other back-of-house jobs.

Kleinhenz told CNBC, “You could now have a major retailer that owns a warehousing and distribution center, and products never go through a store. There has been improvement in productivity and the use of technology. I caution us to [not] be unnerved by these numbers at this point in time.”

Overall unemployment in March was 3.8 percent, unchanged from February.

 by EMILI VESILIND

JCK the Industry Authority