Retail consumer spending is taking a dive while people work bad jobs and pay horrendous Obamacare rates.
We’ve already reported about how Sears and Kmart may not survive and the media has no idea why. But it is not just those stores. The entire retail sector is in trouble. As The Guardian reported:
Canal Street was never a high-end retail experience. But, like many streets in New York City and in cities across the US, it is becoming increasingly desolate.
Boarded-up stores line the thoroughfare that bisects much of lower Manhattan. Many stores that are still open for business also display signs that read “for lease” or “for rent”.
“It’s not Trump,” said one downcast store-owner recently. “It’s not the economy. Something else is happening. People aren’t spending.”
This week, Credit Suisse downgraded the retail sector, saying the outlook had become bleaker than it had anticipated in large part because of events in Washington and through discussion of “whether we think the risks of the border adjustment provision in the House corporate tax reform proposal are fully reflected in apparel and retailing stocks”. Other analysts have shown similar pessimism.
Earlier in the month, Richard Hayne, chief executive officer of Urban Outfitters, equated the woes facing retail in 2017 to the housing market of 2008. Hayne traced the problems to over-expansion in the 1990s and early 2000s, noting that the US now had six times the retail space per capita of either Europe or Japan.
“The US market is oversaturated with retail space and far too much of that space is occupied by stores selling apparel,” he said, anticipating that retail retrenchment would continue “for the foreseeable future and may even accelerate”.
Hayne’s observation that the retail situation is similar to what happened to housing in 2008 sounds suggestive. Why would the retail market now be “oversaturated”? What has changed? If the retail sector was doing fine before and is now crashing, that indicates that the economy is contracting. Another possibility is that the financial gyrations of the Federal Reserve encouraged reckless investment in the retail sector in the hope of a recovery that has never really materialized. Stores that are closing include Macy’s, The Limited, Guess, Abercrombie & Fitch, and J.C. Penney.
And to reiterate: The media doesn’t understand it. Here’s a Business Insider video that explains Penney’s troubles by showing us one messy store:
The only way this could be true is if J. C. Penney allowed all their stores to get messy. Why would they do that? Company spokesman Joey Thomas responded to the video:
Your visit corresponded with a time of less than average staffing during and after winter storm Stella. Many of our associates commute from other areas of the city, so, as you can imagine, travel to work has been challenging for many this week. Additionally, the areas of the store pictured in the images you passed along are clearance sections, which are our most heavily shopped areas of the store … General manager, Joe Cardamone, and his entire team of associates are well-regarded for maintaining an outstanding store environment, and the images you provided are not representative of the standards they’re known to maintain.
This is essentially “fake news” about the economy. Consumer spending is down because consumers don’t have the money to spend. Being without a decent job but overburdened with taxes and Obamacare payments doesn’t leave much money for retail shopping.