The stock market, which normally acts like a group of 13 year-olds hyped up on too much sugar, dropped more than 4% just before yesterday’s closing bell. Some of that drop had to do with reported losses from Freddie Mac (Freddie Mac ruins everything) and changes in the rates for Treasury Bills. The bulk of it, though, had to do with the drop in consumer spending in October.
The numbers released yesterday reflect a 2.8% decline in consumer spending in October and a 4.1% decline from October 2007. This report reflects the largest monthly decline since the Commerce Department started keeping this index in 1992. Since personal consumption spending accounts for 70% of the U.S. GDP*, if people aren’t out there spending their money on stuff the economy naturally shrinks. And while it’s perfectly valid to look at the spending numbers – a 5.5% drop in automobile sales and a 2.2% drop in retail sales excluding automobiles – combined with the rise in the unemployment rate (6.5% in October which is a bullshit number any way because it doesn’t take into account people who have dropped off unemployment roles because they are no longer eligible to collect unemployment, people who are underemployed (want to work full-time but can’t find a job that lets them), and people who have just plain stopped looking) as a measure of consumers’ outlook on the economy I think there’s also another reason why people have stopped buying stuff: There’s nothing to buy.
I will grant you that DC-proper (vs. DC metro which includes the suburbs) isn’t necessarily the best yardstick by which to measure the availability of goods. Smart retailers will stock their outlets with the products that move at those locations which is why you’re not going to see a lot of high end washers and dryers at an in-city outlet of a chain store but you might see three different models of stacked apartment washer and dryer combos. Thing of it is, I think the retailers have gotten stupid.
Circuit City, which has been in trouble since they laid off 3,400 of their most experienced salesclerks in April 2007, recently declared bankruptcy and announced they were closing 155 of their 700 stores. Now, Circuit City has been a feature in the DC area for over 25 years but the thing of it is that in that time I’ve only ever successfully made one purchase there.
Most of the time this is how it would go: I’d go in to look at a piece of electronic equipment (TV, stereo component, what have you) and I’d either be ignored so hard by the salesclerk that I had to go searching for someone to fill out a ticket and take my money or I’d have the clerk giving me an anal probe to prod me to buy. Invariably, I’d make my purchase and take my ticket to the merchandise counter. Someone would take my ticket and disappear behind the plastic sheeting only to return enough minutes later that I was frustrated to tell me that nope, sorry, they didn’t have any of those in the back despite what the salesclerk’s computer said. At which point I’d spend another 15 to 20 minutes at the customer service desk to get my money back. Then I’d go to either a local shop or to Best Buy and get something equally good for about the same price. The problem is that lately all of my brick & mortar shopping experiences have been like visiting Circuit City.
I was at Best Buy yesterday because, well, it was proximate to what I was doing and I wanted to pick up a copy of Hellboy II: The Golden Army. I also wanted to fill in a few holes in my DVD collection (Burglar, Jumpin’ Jack Flash, and the 50th Anniversary edition of Touch of Evil (deal with it)). Admittedly, two of these movies are more than 20 years old so it wasn’t a shock to not find them. What was a shock was that not only did the Best Buy I was in not have a copy of the Touch of Evil anniversary edition, which was released within the last 60 days, none of the 9 Best Buy stores in the metro area had one either.
Now, I could write this off to Best Buy sucking camel nuts if I hadn’t had the exact same experience, minus the clerk looking at me dumbly and mumbling “what’s Touch of Evil?”, at Borders not two weeks ago. And if I hadn’t had a similar experience at both the Office Depot outlets in the DC area when I went to look for recycled printer paper; not only did neither outlet have it in stock the clerks had never even heard of it. The story was the same at Target last weekend when I went to look for new rugs; half the shelves were empty.
So yeah, people aren’t spending money in the retail market because they’re worried about whether or not they’re going to have a job in a month, or two, or six. They’re not spending it because the difference between the price of gas/gallon the price of a gallon of milk never varies by more than 15 cents. They’re not spending money because health insurance premiums are going up and like everything else that goes up the price never quite drops back down to the level it was at before it started to cost more.
But maybe, just maybe, they aren’t spending as much money in the retail market because when they get to the mall there just isn’t anything to buy.
* Dr. Wikipedia says the best way to understand Gross Domestic Product is to think of it thusly:
GDP = consumption + gross investment + government spending + (exports − imports)
Leave a Reply