As I wrote here and here, spirits were exceedingly high at the ICSC New York Conference and Dealmaking. It feels like a cloud has lifted and that brighter days are ahead. And companies are adjusting their business plans accordingly.
The fact that the holiday shopping season is looking so robust is helping a lot.
There's just one nagging question. What about jobs? Friday's report was a disaster. We've experienced two jobless recoveries already. And now this is looking like a job-loss recovery. With millions of people out of work and the pace of job growth so low, can we really sustain a retail recovery? To get back to an unemployment rate of below 5 percent (and to keep pace with population growth), the U.S. economy needs to be creating something like 250,000 to 300,000 jobs per month. We've seen nothing close to that in this recovery and there's no obvious industry to drive that kind of growth going forward. We're looking at a long slog of high unemployment.
Yet, one of the interesting is much lower than for those without. Americans with less than a high school diploma have an unemployment rate of 15.7 percent. The rate for high school graduates is 10.0 percent. For Americans with some college or an associate degree it's 8.7 percent and for those with a bachelor's degree or higher it is just 5.1 percent. The conclusion you can draw from that is people that the people most affected by the crisis were not major consumers.points that Dana Telsey, CEO and chief research officer with New York-based Tesley Advisory Group, mentioned in her presentation during Monday's general session was that part of the explanation for having rising sales along with high unemployment comes when you look more deeply into the numbers. The unemployment rate for Americans with a college degree
Still, on balance it means that unemployment is highest among people that had little discretionary income to begin with. At the same time, a stabilizing economy is encouraging middle class shoppers to spend more. (There's also the fact that some people have opted to stop paying mortgages and increased spending in other areas instead.) And don't forget the rich, who seem to have bounced back more quickly than anybody else. So the retail recovery is being driven by the more well-off, which helps explain in part why the luxury sector has bounced back as strongly as it has. On the flip side, discount and value retailers also continue to do well. It's the retailers in the middle that face the greatest challenges.
The question then becomes, can the retail sector thrive in an environment where it's largely relying on consumption by the wealthiest Americans? Will they continue to spend at this clip? Or will we need to see more job growth and improvement in the living situations for people at the bottom for retail to truly recover?