People Are Worried

Holiday season retail sales are down this year:

Price-slashing failed to rescue a bleak holiday season for beleaguered retailers, as sales plunged across most categories on shrinking consumer spending, according to new data released Thursday.

Despite a flurry of last-minute shoppers lured by the deep discounts, total retail sales, excluding automobiles, fell over the year-earlier period by 5.5% in November and 8% in December through Christmas Eve, according to MasterCard Inc.’s SpendingPulse unit.

When gasoline sales are excluded, the fall in overall retail sales is more modest: a 2.5% drop in November and a 4% decline in December. A 40% drop in gasoline prices over the year-earlier period contributed to the sharp decline in total sales.

As you can see from the graphic above the most affected areas are high-ticket and discretionary, e.g. luxury goods and electronics.

According to the Bureau of Labor Statistics the current unemployment rate is 6.7%. That’s risen a bit and I’m sure that the people who’ve lost their jobs are hurting but it isn’t high enough to panic over. However, California’s unemployment rate is 8.4%, the District of Columbia’s is 8%, and I’m sure with all the layoffs in the financial sector over the last year that New York City and some of the suburbs in the vicinity of New York where people in that sector live are showing sharply higher unemployment rates, too (although it isn’t reflected in the statewide unemployment rate yet). Since so many of our opinion makers live in Los Angeles, New York, and Washington DC, I’m sure that makes things look a lot bleaker than they actually are.

More than anything else I think that falling retail sales means that people are worried about the future. Basically, it’s a lack of trust.

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