Apt for this season of retail spending, National Pawnbrokers Day is celebrated on what’s also St. Nicholas Day. St. Nicholas was the patron saint of pawnbroking and the model for what later became Santa Claus. In a twisted way, St. Nick could be blamed for creating the insanity of what’s become the holiday shopping season.
On Monday, both brick & mortar and e-commerce stores reported lackluster Black Friday weekend and Cyber-Monday sales. The National Retail Federation (NRF) reported retail spending from Thanksgiving Day through Sunday were no better than Mariah Carey’s Rockefeller Center performance, as sales fell 11 percent year-over-year to $50.9 billion. This is the second year in a row with a drop in in-store sales. Cyber Monday sales increased 8.7 percent, which was considerably lower than last year’s 20.6 percent increase. Further details suggest retailers are stealing from their Black Friday and Cyber Monday sales by turning a one-month season into a half-year celebration.
If stores can afford to offer “deep holiday discounts” as early as September, their products are overpriced and should simply be lowered. The NRF still projects 2014 holiday spending to increase 4.1 percent over 2013. We’ll see if jolly St. Nick delivers better than NBC’s live version of Peter Pan.
Also, on Monday, Gasbuddy.com, who also has a great app, excited consumers with its forecast that gas prices may reach $2 a gallon by Christmas in some parts of the country. By Thursday, this prediction rang true and embarrassed economic prognosticators everywhere with Gasbuddy’s uncanny ability to prognosticate.
The drop in gas prices is due to the 10 percent drop in crude oil prices the previous Friday and 32 percent drop in crude oil prices year-to-date. The Federal Reserve believes this drop will increase spending in other areas and provide a boon for the overall economy. Holiday spending numbers thus far suggest otherwise, which we like. Put this savings in the bank or in investments.
On Tuesday, the Commerce Department reported that October construction spending rose 1.1 percent to a seasonally-adjusted annualized rate of $971 billion. This is good news for jobs, as many of the jobs first and longest lost were in construction. This should help the overall economy.
It was, then, reported on Tuesday that November auto sales were up. The average age of cars on the road is up and increased sales may be due to a combination of pent up demand and need. Banks see an opportunity and, consequently, have increased sub-prime auto-lending and extended terms to 72 and 96 months. This “creative financing” increases America’s renting problem, though, and may have long-term negative repercussions. If you can’t buy a car with a 36-month term and 20 percent down, you can’t afford it.
On Thursday, Challenger, Gray & Christmas brought the first economic Christmas present of the season with its November Job Cuts report. It showed the layoff count dropped to 35,940 from October’s 51,183 layoffs.
The Labor Department announced its monthly Employment Situations report on Friday. It showed that 321,000 new jobs were added in November, the most since January 2012 and the tenth consecutive monthly gain. We’ll drink to that jobs report. Thankfully Friday was also the 81st anniversary of prohibition’s repeal. The participation rate, as well as the official unemployment rate, however stayed steady at 62.8 percent and 5.8 percent respectively. The average work week increased by six minutes and the average hourly wage increased 0.4 percent to $24.57. Wages are up 2.1 percent year-over-year.
Finally, the Federal Reserve Board of Governors released their October Consumer Credit report, which saw the pace of consumer acquired credit slow to $13.2 billion from September’s $15.9 billion increase. Non-revolving credit (auto and student loans) increased $12.3 billion, while revolving credit (credit cards) increased only $0.9 billion after September’s $1.4 billion increase. For consumes, this is good. Depending on auto-loan terms, the good may be watered down.
The economy continues to improve, though headwinds exist (government shutdown, deflation in Europe and stagnant wages). While it’s tempting to spend more this holiday season because of lower gas prices and improved jobs market, we continue to suggest focusing on savings and investments. Don’t miss your opportunity repair past mistakes and prepare for future volatility.
Jobs are improving, though mostly in the service/part-time sector. Improvements have been seen in professional fields, but wages remain stuck at about 2008 levels. Now may be a good time to re-enter the job market, if you’re out. If you’re already in, now may be a good time to seek greener pastures and hire wages with a new employer.
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