The CEO of the National Retail Federation, Matthew Shay, penned a letter that stated the organization's position on how badly its members could be harmed by the government shutdown and lack of a long-term resolution. Anyone reading the letter could correctly draw the conclusion that past forecasts of holiday retail sales are much too high, and that what was to be a good season is about to turn into a bad one. Americans who already make little should be most badly affected.
As we head into the holiday shopping season, retailers and consumers need stability and certainty from policymakers in Washington and assurance that the economy will not implode due to their actions or more important, lack thereof. This new norm of legislating from crisis to crisis is no way to govern.
Our economic recovery is retail-led and consumer-driven, and political leaders on both ends of Pennsylvania Avenue need to stop undermining consumer confidence with partisan posturing. When consumers cut back their spending, it threatens jobs in every industry. If it’s bad for retail, it’s bad for the economy, and ultimately the biggest losers are American taxpayers.
Shay's position is not hard to defend, and may even be optimistic.
One of the largest effects of slow holiday sales have been repeated several times over. The largest retailers, led by Wal-Mart Stores Inc. (WMT), Target Corp. (TGT) and Macy's Inc. (NYSE: M), have added hundreds of thousands of temporary jobs. Poor sales between the start of November and the end of December will hurt the odds that most, if any of these people, will be kept on into 2014. The trouble may be much worse than that. Current permanent employees are at risk of firings along with temporary workers. This is particularly true at the retailers that need the holidays to keep their businesses intact, with the top of that list including J.C. Penney Co. Inc. (JCP), and Sears and Kmart, both owned by Sears Holdings Corp. (SHLD).
At the center of the association's predictions for holiday sales is its conviction that the season should be better than most in the past decade:
NRF expects sales in the months of November and December to marginally increase 3.9 percent to $602.1 billion, over 2012’s actual 3.5 percent holiday season sales growth. The forecast is higher than the 10-year average holiday sales growth of 3.3 percent.
As is true with all these kinds of forecasts is the fact that many of the companies included fall well below the average. It is not hard to make the case that lower income households, and lower middle-class ones, will take the brunt of a drop in GDP growth. After all, they have the least discretionary income among Americans. That argues the retailers who target them, particularly Walmart, are in for a rough ride. With more than one millions workers in the United States, Walmart's ability to keep its workforce at present levels will be harder.
The holiday will not be much of a holiday for retail companies and their workers, particularly if they do not cater to people who have the incomes to weather the Washington disaster.
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