The Last Ride Of The Unemployment Rate
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It's easy to set aside the nostalgia, so to speak, since this is likely the last Christmas holiday season to be talked about in the media in the positively glowing terms of the unemployment rate. Ever since the "recovery" began, each and every year the internet and TV channels are filled with stories about how strong the consumer is and therefore how great the economy must be. This tendency is greatly amplified as the holidays roll in, as it is the Christmas season where all of this is given its rightful importance.
This year is already no different; almost all of the content generated for the mainstream is downright giddy. Such as:
Shoppers lined up at stores and flocked to their computer screens in search of bargains on Black Friday, putting the retail industry on track for what it hopes will become a record sales weekend.
Shoppers appeared ready to open their wallets, buoyed by a generally strong economy and rising stock market. And major store chains did their part, offering dramatic discounts on their traffic-building "doorbuster" opening specials.
Those paragraphs were written under a headline of Retailers Aim To Smash Four-Day Weekend Sales Records as if the narrative of the past almost eight years weren't perfectly clear by now. Retailers have been "smashing" all sorts of things during that time, but it was more likely in frustration and anger than in what was described by "reporters."
The National Retail Federation got into the act, as is its custom. NRF President and CEO Matthew Shay was quoted in his organization's official press release trying his best:
It was a strong weekend for retailers, but an even better weekend for consumers, who took advantage of some really incredible deals. In fact, over one third of shoppers said 100% of their purchases were on sale.
That is actually a very bad sign for retailers as well as about consumers. While you will hear any number of stories about the huge growth in online sales, the truth is a bit darker since consumers are taking their shopping virtual out of necessity. As the quote above shows, they will shop in the real world only when the price is there.
In the federation's shopper survey, more than a third of respondents (36 percent) said that 100 percent of what they bought over the weekend was on sale. That compares with 11 percent who said they only purchased discounted merchandise last year.
According to the NRF and others, spending overall is suspect yet again for Black Friday weekend regardless of where the sale was made - at an actual cash register or an internet one. The Federation estimates that total net spending for the four days through yesterday $289.19 per person this year, down from $299.60 last year. In terms of total spending for the whole weekend, the NRF figures $310.86 per person in 2016 as compared to $319.64 in 2015, and $407.02 in 2013. Again, these totals include whatever was purchased wherever it was purchased.
That's a 24% drop in just three years. Some of the decline is the dispersal of Christmas spending away from just Black Friday alone, as the weekend itself is stripped of some of its marginal importance, but that is the part always left out of the media reports. Americans have become far more frugal out of continuing necessity no matter what the unemployment rate says. That has been especially true of the past several years.
According to the mainstream, wages are rising as is employment, yet there isn't any detectable effects in the actual numbers, just the commentary meant to frame them in a certain optimistic way. Black Friday in 2014, for example, was a disaster, presaging what was supposed to be "impossible", which is why everyone wrote it all off as these same shifts in consumer preferences. I wrote just about two years ago that economists and policymakers should have been paying much more attention to that Black Friday message than the unemployment rate that represented a much smaller fraction of America:
There is an undoubted shift in the behavior of consumers, including and especially during the peak retail season between Thanksgiving and Christmas. However, to say that is the sole reason for the decline in actual sales volume is to stretch that truth into (in many cases intentional) utter misdirection. The initial indications from the retail outlets are so far beyond bad, worse than even last year's decline...
In simply holiday sales alone, what happened during Black Friday was not anomalous at all, but rather all too representative of what was to come. It is simply too much to suggest both a growing decline and the timing of it as largely innocuous spending patterns inside an otherwise very healthy economy. There is nothing healthy about this, especially as it captures the movement of spending online.
In other words, Black Friday 2014 was a harbinger of the actual economy that would unfold under the "rising dollar." Janet Yellen saw GDP was 4% and the unemployment rate falling more quickly than economists had modeled even for a QE3 economy, so her view prevailed despite overwhelming evidence right at that time it was beyond flawed. The economic weakness that developed to start 2015 was never "unexpected", it was simply rewritten by the media that wanted Janet Yellen to be right.
What is relevant to the economy of 2016 is that Black Friday sales have never recovered since 2014. For the second year since, it seems that holiday spending will remain subdued, perfectly fitting the depression cycle pattern that shows the economy being getting knocked down further by monetary events and never getting back up. That will in all likelihood translate into a sales record as overall Christmas holiday sales will rise slightly from last year, but it is a hollow one because the total gain is likely to be harmfully, painfully small for still another year.
The media being what it is, this will very likely be the last time the data so diverges from the narrative. I have little doubt that next year under a President Trump things will be different; by that I don't necessarily mean the economy, though there is the smallest hope, I suppose, that a new Trump Presidency gets the one thing right the world needs someone to someday get right ("dollars"). Rather, I strongly suspect that if holiday sales or any sales continue to be subdued during his term that they will actually be described that way.
After eight years of trying to see recovery where there was none, the constant spin of sunshine will very likely disappear on January 20. It is ironic in one sense since it is this very disparity between mainstream "reporting" and actual economic conditions that contributed to the Trump victory in the first place. As Black Fridays for years now, but especially 2014, a great many people were fed up with hearing how wonderful the economy was when they had to scrimp and save and cut back at each and every one. For the last several years, all that has mattered in the media has been the unemployment rate no matter how many times it was shown in the real economy that the statistic was misleading or even invalid.
This is the last holiday where mainstream deference to the employment numbers will be so absurdly absolute. Several years too late, realistic descriptions are set to return to the legacy media
This article was written by Jeffrey P. Snider for Alhambra Investment Partners on Nov 28, 2016.
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