Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

One Economic Step Forward and Two Back


Walmart is the latest to paint a dismal picture of the consumer.

In case you needed more evidence that an economic recovery is far from imminent, it's here.

Consumers, buffeted by unemployment or fear of job loss and a tightening of credit, aren't yet ready to open their wallets and spend.

Walmart (WMT), the world's largest retailer, says third-quarter profit rose 3.2% on cost-cutting and tight inventory controls. The company looks for a so-so holiday shopping season and expects sales to be flat in the fourth quarter.

Walmart's net income rose to $3.24 billion, or $0.84 a share for the period ended October 31, from $3.14 billion, or $0.80, for the same period a year ago. Analysts expected the company to earn $0.81. In mid-day trading, Walmart's stock rose by about 1%.

"We expect Walmart to remain aggressive on price throughout the holiday season," Robert Drbul, an analyst for Barclays Capital, says in a research report. He looks for the company to cut prices on toys and electronics in an effort to lure buyers into stores.

But it probably won't be enough to get consumers to spend heavily. The US Labor Department says initial jobless claims fell to the lowest level since January. But the jobless figures offer cold comfort: There are still more than a half million people filing for unemployment benefits for the first time each week.

While layoffs appear to be slowing, it's not clear that hiring has resumed.

Abiel Reinhart, an economist at JPMorgan Chase, says unemployment claims in the high 400,000s would indicate that companies are starting to hire. He believes that level could be reached in January, but he doesn't look for a drop in the nation's unemployment rate until the second quarter of 2010.

The nation's current unemployment rate is 10.2%, the highest in 26 years. The gap between the unemployment rate and the 3.5% annual growth rate posted July to September after four consecutive quarterly drops leads some economists to forecast a jobless recovery.

There are more job cuts ahead. Adobe Systems (ADBE), developer of Acrobat, Photoshop, and Flash software products, announced plans to cut about 680 jobs, or 9% of its workforce. AOL, soon to be split from Time Warner (TWX), recently cut 100 jobs and reduced its headcount to about 6,900.

Earlier, the Federal Reserve reported that consumer credit fell for the eighth straight month. Consumer credit decreased at an annual rate of 6% in the third quarter of 2009, including a 7.25% decline in September -- the most recent snapshot. Revolving credit fell at an annual rate of 10% and non-revolving credit fell at an annual rate of 3.75%. Tight credit limits consumer spending.

The Federal Deposit Insurance Corporation says more than 100 banks have failed this year. Lenders are tightening standards for both individuals and businesses. Consumers continue to save, even among the first signs of a recovery. The US Bureau of Economic Analysis says personal savings rate, or savings as a percentage of disposable personal income, was 3.3% in the third quarter, down from 4.9% in the second.

Despite a dip in initial jobless claims and what may be the first signs of a turnaround, consumers aren't yet in a position to open their wallets and spend. That means the economy will limp through the holiday shopping season and into next year.

Copyright 2009 Minyanville. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. AP contributed to this report.

Register For Minyanville's Holiday Festivus '09 Here
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos