Only Sixty Shopping Days Until Christmas

The very most important corporate earnings for the last quarter are, with few exceptions, out now and October unemployment numbers will be released in a week. Third quarter GDP figures will be released any moment. That leaves economists to walk the long hallway of the rest of the year without a large number of new macroeconomic figures being posted. The normal consumer sentiment and business spending and inventory numbers will be announced as usual along with housing and employment statistics. But, the number which many analysts are holding their breath for is holiday retail sales. Most economists expect the figures to drop from 2008, but only slightly.

The consumer does not seem to be as sanguine as the economists are. The new Wall Street Journal/NBC poll shows that 58% of those surveyed believe that the economy will slide further up from 52% from when the poll was taken last month, and only 29% of those asked think the economy has “pretty much hit bottom.”

The basis of a strong GDP recovery still has to be a brightening of the consumer’s mood. Optimists about the economy keep trying to find a way around that fact by saying that overseas demand and the value of the dollar will help lift exports or that business-to-business spending will show a sudden resurrection. Even if these things do happen, the consumer’s actions are still two-thirds of GDP and there is no wishing and analyzing a way around that.

The consumer may be remarkably stingy this holiday, stingy at a level that will make Christmas of last year look healthy. Ten percent of American workers will be without jobs by Christmas. The “real” unemployment numbers, which for some reason are not at the top of the press release that the Bureau of Labor Statistics gives out, will be closer to 16% when everyone who could work full-time but doesn’t work full-time is factored in. In states such as Michigan, Nevada, California, and Rhode Island that “real” number will be closer to 20%.

Very few consumers will be in a spending mood this holiday season and those who are may find that banks and credit card companies will not want to be helpful to them by extending credit. That may put hidden shackles on the hands and arms of ready gift-buyers. Retailers who might benefit from extending credit to shoppers on their own will have to balance that desire with the strengths of their own financial conditions. Many store chains will find that they are not in an economic position to risk giving money to people who may not have a job in the first half of 2010.

Oil keeps hovering around $80 and at that level it may not bedevil businesses or consumers too much. Most drivers can live with $2.75 gasoline. Higher crude will not do the airlines or companies that use petrochemicals much good, but none of them is facing the harsh effects of oil trading at $140 a barrel as it did last July. There is a tipping point for many households when they look at their cost for driving and heating their homes. Winter and rising crude could come at nearly the same time this year. If they do, people will cut back on both how much they drive and shop.

Two months, the two months between now and Christmas, does not seem like a very long time. But, it is long enough to set the economic tone for most of 2010. A ruinous holiday season an increase in energy prices and another unanticipated sharp move up in unemployment could crush any hope for a New Year economic recovery.

Douglas A. McIntyre