An uncertain economy may have left Black Friday shoppers wary of splurging despite deeply discounted offers to win over consumers, according to an economics expert.
On the one hand, the jobs market has been “very robust and very strong” with 260,000 jobs added in October, including 56,700 in California, according to Raymond Sfeir, director of the A. Gary Anderson Center for Economic Research at Chapman University.
But real wages are not keeping up with inflation.
The hourly wage rate in the private sector has registered a 4.7% year-over-year increase according to figures released in October, which is “not bad, even though it is 3% lower than the inflation rate.”
That means, Sfeir said, that “those wages are still declining because the inflation rate is above the rate of wages.”
Gas prices are also down from summer’s highs, which may help consumers in their decisions to around looking for bargains, Sfeir said.
“But on the negative side the (Consumer Price Index) is still very high,” Sfeir said. “And the savings rate has gone down dramatically in the last few months.”
Savings saw record highs at the start of the pandemic with more people staying home and socially distancing, Sfeir said.
“We spent a huge amount of our savings in the last year and our savings are now being depleted at a very fast rate,” Sfeir said.
The draw down on savings is likely fueled by pent-up demand and higher prices, Sfeir said. Consumer confidence is also declining as recession concerns rise.
“The increase this shopping season will be much lower than what it was last year,” Sfeir said, who predicts people will buy less. “My guess is it will be less than 8%.”
One indicator is from shoppers who are relying more on less-expensive grocery-chain generic brands over name brands, Sfeir said.
If Black Friday, and the general holiday shopping to follow, fall short of retailers’ expectations, Sfeir predicts there will be “some heavy discounts” after Dec. 25.
Too much inventory also may be a contributing factor as retailers deal with shipping companies that have caught up with demand.
“There are no ships sitting at ports (in Los Angeles or Long Beach), and that shows the amount of orders have declined dramatically, or, otherwise, you’d still see some of those ships waiting,” Sfeir said. “They do have more inventory than they were planning to. So after Christmas you may see even more discounts.”
Sfeir predicts a “mild recession” and said the Federal Reserve has been making the right moves to cool off the economy and slow inflation.
“It will be short and mild,” Sfeir said.
– City News Service