Shoppers have reasons to act like grinches
There are ample reasons for America's shoppers to act like grinches this holiday season, with lost jobs, wilting retirement accounts and shrinking home values topping the list.
And if anyone needed more evidence of consumers' weary state and the nation's deteriorating job market, they will get it Thursday with the latest batch of bleak economic data.
The number of newly laid-off people signing up for unemployment benefits last week is expected to climb by 8,000 to 537,000, according to economists' forecasts of new data to be released by the Labor Department.
Retailers are also expected to show grim results when they report their November sales on Thursday.
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The Goldman Sachs-International Council of Shopping Centers sales index of retailers is expected to show a 1 percent drop in November, slightly worse than the 0.9 percent decline in October. That would be the weakest November performance since at least 1969 when the index began.
"Basically shoppers and workers are being told there is no Santa Claus," said Richard Yamarone, an economist at Argus Research.
Another economic report is expected to show that orders placed with U.S. factories fell in October, reflecting pull backs from buyers in the United States as well as shoppers overseas, who are coping with their own economic troubles.
Federal Reserve Chairman Ben Bernanke, meanwhile, will speak about the housing crisis, which has driven up foreclosures and forced financial companies to log massive losses on soured mortgage investments. The housing debacle touched off the worst financial crisis since the 1930s that Bernanke and Treasury Secretary Henry Paulson have been desperately trying to bring under control.
And, the chiefs of Chrysler LLC, General Motors Corp. and Ford Motor Co. are preparing to return to Capitol Hill Thursday and Friday to make a fresh plea for as much as $34 billion in emergency aid. Trying to win over skeptical lawmakers, automakers and their union on Wednesday promised labor concession and restructuring. Were one or more of Detroit's Big Three to fail, that would deepen the recession and cause more job losses, industry officials warned.
Heading into the holidays, the country's economic picture has darkened further, according to a Federal Reserve survey of business conditions around the country released on Wednesday. Americans hunkered down, forcing retailers to ring up fewer sales and factories to cut back on production.
The survey suggested the country was sinking deeper into recession.
"Economic activity weakened across all Federal Reserve districts," the report concluded.
The Fed didn't use the word "recession," but just two days earlier the National Bureau of Economic Research declared what many Americans already knew in their bones: that the country had been suffering through one since last December.
To cushion the fallout, Bernanke said Monday that the central bank is prepared to lower its key interest rate and to explore other ways to revive economic activity. Many economists predict the Fed will cut its rate - now near a historic low of 1 percent - at its last scheduled meeting this year on Dec. 16.
"We've seen things fall off a cliff," said economist Ken Mayland, president of ClearView Economics. "Everybody - consumers and businesses - are just freezing."
"Retailers were preparing for a relatively slow holiday sales season," the Fed report said. New York retailers said the holiday sales season is likely to feature more discounted prices on merchandise than last year. Some retailers in the Fed regions of Boston, Philadelphia, Cleveland and Dallas planned to cut capital spending projects for 2009.
Consumer spending - which includes retail sales - is a major shaper of national economic activity. But job cuts, tanking investment portfolios and sinking home values have made American consumers wary of spending. The economy jolted into reverse in the summer as consumers slashed their spending by the most in 28 years.
Many believe the economy will continue to shrink through the rest of this year and into the first quarter of next year. At 12 months and counting, the current recession is longer than the 10-month average length of recessions since World War II. The record for the longest recession in the postwar period is 16 months, which was reached in the 1973-75 and 1981-82 downturns.
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AP retail writer Anne D'Innocenzio and Economics Writer Christopher S. Rugaber contributed to this report.
(Copyright 2008 by The Associated Press. All Rights Reserved.)
